Hedge funds have begun to take out bets against property businesses that are exposed to the downturn in London’s housing market, in the first sign that investors are tentatively seeking to profit from the slowdown.
Several hedge funds have taken out short positions, essentially bets that a company’s share price will fall, against estate agents Foxtons and Savills, along with property portal Zoopla, and housebuilder Berkeley Group.
The capital faces a surfeit of expensive new homes as developers rush to profit from foreign demand to buy in London.
While the bets are still relatively small they represent the first sign that hedge funds have begun to move against the UK property market after several years of surging house prices, and the high-profile stock market listings of Foxtons and Zoopla.
London house prices have risen by 50 per cent in the past five years according to the Office for National Statistics, but the top end of the market has wobbled in recent months as a crackdown on foreign investors and the threat of a mansion tax stirred uncertainty.
Foxtons, a rapidly expanding chain of estate agents focused on expensive parts of the capital, went public in 2013.
It issued a profit warning last autumn, and its sales commission in the final quarter of 2014 slumped by 25 per cent as a result of a “challenging” market.
Zoopla’s subsidiary site PrimeLocation is the most prominent website for British luxury property sales, and a third of Zoopla’s revenues come from the London market, according to estimates by analysts at Exane BNP Paribas.
It has also been hit recently by the launch of a rival portal, OntheMarket, by a group of disgruntled estate agents.
The bets against Zoopla, according to Markit, are at their highest level since it listed in June 2014 and have risen by 42 per cent in a month.
Berkeley is London’s largest housebuilder, and is best known for expensive flats which it markets abroad as well as to British buyers. After a couple of years of spectacular performance London’s housing market has returned to “normal market conditions”, the company said late last year.
A short position on fellow housebuilder Persimmon was removed recently.
Arrowgrass and Brookfield Asset Management have sold short 1.56 per cent of Savills stock. Ennsmore Fund Management and GLG Partners, owned by Man Group, are short 1.13 per cent of Zoopla, according to regulatory disclosures. Foxtons meanwhile is being sold short by Numeric and Altair Investment Management, which have built up a collective short position against 3.59 per cent of its shares.
In a further sign that investors are becoming warier about the housing market, estate agent Chestertons this week called off its attempt to find a buyer. It said that it had received several offers but had decided to focus on expanding the business instead.
Additional reporting by Arash Massoudi
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