Indicators for the London Housing market

by George Hatjoullis

Foxtons

On 23/02/2014 I published a blog (The London House Price Bubble: how might it burst?) which considered the various factors that might burst the London house price bubble. On April 4, 2014 I published another blog suggesting the bubble might be about to burst. I looked at many indicators but one I did not think to look at was the Foxtons plc share price. It would seem the price of Foxtons shares peaked on 28/02/2014 and from mid-March began a trend decline. Foxtons is described as a ‘ London-focused’ estate agent in today’s FT (http://on.ft.com/1z0ws8w).

It is worth noting because the Foxton’s share price seems to be a very good indicator of the current state and probable direction of the London house market. The decline in the share price reflects falling volumes, and hence commissions, rather than falling prices. House prices tend to follow volumes but with a lag. Sellers do not lower asking prices but rather initially lengthen the sales period. Eventually, sales take place at lower prices unless the market recovers. The signal from the Foxtons price is all the more remarkable because a substantial portion of profits come from rental services and these have been more stable. The Foxtons share price is signalling cloudy skies for London house prices and this price is worth monitoring as a sensitive indicator to London housing. It is also worth noting that if you want to invest in London housing at some point, Foxtons share may provide a useful and diversified vehicle for doing so. Just a thought.

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