Hedge fund managers are taking short positions against the biggest listed provider of luxury London homes in a bet that weakening emerging markets will put the once buoyant sector into reverse. A small group of funds are targeting the shares of Berkeley Group, the main listed proxy for new high-end London property, amid signs that Asian and Russian buyers are deserting the market.
Odey Asset Management, BlueMountain Capital Management and Anchorage Capital took short positions against the FTSE 100 builder in January, worth 2.2 per cent of its share capital, according to data disclosed to the Financial Conduct Authority. The short positions run against analysts’ consensus that Berkeley is well positioned to continue growing — and indicate the hedge funds believe pricing and transaction levels for luxury London homes have further to fall. The market for luxury London homes faltered last year after being driven upwards in the previous few years, partly by overseas buyers seeking a bolthole or a safe haven for their cash. Many foreign buyers have suffered from a weakening of emerging market currencies and an increase in stamp duty on expensive homes. Prices paid per square foot for homes costing more than £1m fell by 2.7 per cent in 2015 after two consecutive years of 10 per cent rises, according to the data provider LonRes. Anthony Codling, an analyst at Jefferies, the investment bank, said he had spoken to hedge funds looking to bet against Berkeley. “They think overseas demand is falling away and there are pockets of oversupply in new-build homes, which will reduce selling prices for Berkeley and bring their share price down,” he said.
Berkeley’s shares have risen 25 per cent in the past year, fuelled by rising sales. The company declined to comment. About 54,000 homes are planned or under construction in the most expensive areas of the capital, with most of these set to be priced at £1m or more, research by LonRes found last year — even though only 3,900 homes worth more than £1m were sold in these areas in 2014. Mr Codling said he did not agree with the case for shorting Berkeley. The company’s shares are trading at 2.7 times book value after it set out a plan to pay out £16.34 per share in dividends by 2021. “As long as investors get that cash return I don’t see significant downward pressure on the share price,” said Mr Codling. Charlie Campbell, analyst at Liberum, said there were concerns that overseas buyers who paid deposits of 10 or 20 per cent on off-plan London flats might struggle to pay the balance on completion if their home currencies have since weakened.
Number of First-Time Home Buyers Falls to Lowest Levels in Three Decades Figure represents third straight annual decline and lowest percentage since 1987 - wall street journal November 2015!
Potential first-time home buyers scared off as 'typical' deposit surpasses £30,000 barrier - Express Jan 2016
Number of first-time buyers in decline
Posted on 11 January, 2016 by Laurence Glynne in Property News
First-time buyers paid an average deposit of £91,409 for a property in London last year, according to mortgage lender Halifax.
Number of first-time buyers in declineBut the number of people in the UK buying a property for the first time dropped 0.5% in 2015 to 310,000 when compared with the previous 12 months.
The decline in the number of people getting on the property ladder is the first since 2011 and is being put down to the size of deposit first-time buyers now need.
Halifax reports that average deposit for first-time buyers rose 13% from £29,094 to £32,927 in 2015, while a growing number of borrowers are taking out 35-year mortgages.
Since the property market reached its last peak in 2007, the average first-time buyer deposit has risen by 88% from £17,499. At that point, loans of more than 100% of a property’s value were available from some lenders.
Miners do poorly because of China. Oil does poorly because of China and Saudi Arabia. Home builders do well because there is a shortage of homes. LOL
thats the funniest thing ive read in ages LOL Shortage of homes? everyone i know that can afford one or more or wants to own their own home has one. A syrian cant afford one. Neither can a student. Its happening already they the market riggers just want you to believe that!
BREXIT is the dark cloud about to destroy property values watch and see ;)
Miners do poorly because of China. Oil does poorly because of China and Saudi Arabia. Home builders do well because there is a shortage of homes.
If these things change, fortunes may change. I don't see the UK having to many homes anytime soon, and the government has proven that they are willing to throw tax money at underpinning housing bubbles.
Best of luck with your shorts.
Disclaimer: have no stake of any kind in this company.
8 December 2015 1:43am City A.M. According to analysts from Shore Capital, business is looking rosy for property developer Berkeley Group, with trading for its first half of the financial year roughly in line with expectations and the underlying profit before tax of £242m, marginally beating estimates. However, despite the positive signs for the company’s income, the brokers maintained a “hold” recommendation.
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.