Now the City hates estate agents too

I’m not sure why one should be surprised but it is becoming clear that even the City takes a dim view of those involved in selling houses these days. There aren’t too many residential property quoted companies but those who are have clearly not been good boys since Santa has decided they all need a good kicking. 

Savills, purveyors of the smartest houses to the gentry and A-list celebrities saw it’s share price trading at over £7.00 last May. The company responsible for those glossy adverts in Country Life and who count members of the Royal Family among their clients has seen it’s share price fall to around £2.50 this month. Despite the bonanza that they have had in recent years selling expensive penthouses to City types with bonuses bigger than Gordon Ramseys’ mouth the firm have been bitten by these same people who seem to think that they no longer have such “an attractive outlook”. 

Shares in young pretender Humberts have suffered a worse fate despite the backing of property mogul Vincent Tchenguiz. Shares were over £1 this time last year and despite the CEO trying to demonstrate the bottom by buying shares himself in October at 30p they are now asking for ‘offers around’ 28 pence! Spare a thought for the firms that Humberts have bought in their frantic expansion in the past 18 months most of whom have taken over 50% of their payment in Humberts paper. Oops!

Both agents have expanded rapidly of late with Savills driving down-market bringing their high service levels to owners of more modest properties. The business looks undervalued to me with a solid dividend and a bright future as outgoing Chief Executive Aubrey Adams who has been at the helm for over ten years handing over to the very capable Jeremy Helsby who worked for the firm when I did over fifteen years ago. Spot my career mistake! 

Humberts have been altogether more aggressive. A sleepy firm of land agents who’s image in the nineties was frankly frumpier than Kirsty Alsop was snapped up by Timmy James and the queen of Kensington Patricia Farley who cleverly raised money on AIM to fund the birth of a new and exciting project. Max Ziff who sounds more like a Bond villain than the suave boss based off Bond Street has been rushing around buying back franchises and snapping up bright independent firms around the country. The force should be with him but the City scribblers are clearly worried about the short term future and perhaps what pruning the canny Mr Tchenguiz might require to protect his investment. As Icarus discovered, if you fly to close to the sun, gravity has a painful way of penalising your optimism.

Perhaps the starkest message comes from Rightmove, the biggest of the old-style property portals who floated in 2006 with a monumental valuation over £500million. At the time there were many who felt that this was the total of all the valuations that their estate agent clients had guessed might be the price rather than a sensible reflection of the true value of the business and recent notes from analyst will have made sobering reading for shareholders who might have bought last October at around £6.20. Shares are now around £4.50 as concerns over their business model take hold and new entrants like with new ideas of what the public want crash in on their party. 

Experts are only just getting to grips with what might actually happen to house prices this year and this realisation will only add to the concerns that the boys and girls in the City have. It seems unlikely that they feel they have punished the share price of these companies enough – their commercial cousins have had a similar time and they may all have further to fall. Like the products they sell, it likely that the fundamentals may be much sounder than the valuations they have today but as clients of estate agents are often told, value is what someone will pay and not necessarily a reflection of the cost of the underlying asset.