The news is once again full of fears of an overheating property market, and our listed housebuilders have been rewarding their shareholders very nicely and are reaching share prices not seen since before the recession.
What an ideal time, then, to float your estate agent business!
Second biggest
That’s what the folks behind Zoopla appear to be thinking, anyway, as major owner Daily Mail & General Trust (LSE: DMGT) has confirmed plans for a flotation next month.
Zoopla, which runs the UK’s second largest property website behind Rightmove, is expected to be valued at around £1bn, and in the first six months of its current year it brought in an operating profit of £10m.
Daily Mail & General Trust currently owns a little more than 50% in the company, and how much is to be sold off is as yet unknown — but should we be buying any?
Housebuilders booming
Well, look at how the housing sector has been going. Persimmon (LSE: PSN) shares have soared by more than 250% over the past five years to 1,337p. And at the time of its latest interim update last month we heard the sound of records tumbing — private sales per site up 25% on the previous year, forward sales up 35%, and average selling price up 3% to £200,400.
The picture is similar at fellow FTSE 100 constituent Barratt Developments (LSE: BDEV), where we see a 5-year share price appreciation just short of Persimmon’s, to 355p today. Latest interim figures? Private reservations up 25% and forward sales up 46%.
We’ve had a less impressive, but still nice, 80% gain from Bovis Homes (LSE: BVS) to a price of 778p, comfortably beating the FTSE 100’s gain of 55%, and the story is pretty much the same across the business.
But are we approaching a peak for house prices and for housebuilder profits? If we believe the latest political machinations, we just might be.
Prices overheating?
The latest scare story is that London house prices have soared by 17% over the past 12 months, although country-wise the figure is closer to 9% — to a large extent it’s been a boom year in London with not much happening elsewhere. But people are getting worried that price rises are creeping back to the pre-crash rates of 2007, and there’s talk of scaling back the government’s Help to Buy scheme.
Even Bank of England governor Mark Carney has been warning of potential economic harm, opining that there are just too few new homes being built.
So, invest or not?
So what about Zoopla? Well, one thing we can be sure of, as with all flotations, is that the current owners aren’t trying to offer us a bargain. No, they’re trying to time things to maximize the cash they’ll make for themselves — which is exactly what they should be doing, of course.
For that reason alone, I’m not a fan of investing in flotations (unless they’re government giveaways). I’ll be sitting this one out.
