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The Foxtons IPO

Posted: September 2013

By Jo Eccles

Foxtons recently announced that it plans to float on the stock market which, even if you don’t work in the property industry, is big news and definitely a discussion point. Why? Because this could signal a firm tipping point in property market direction – but it’s not yet clear which way it’s going.

It seems that Foxtons are making a call. Either they believe that the market has reached its peak and the owners and management at Foxtons are trying to cash in before the market falls – the founder of Foxtons, Jon Hunt, certainly timed his sale perfectly when he sold the company in May 2007 just before the market fell last time, and the new owners of Foxtons could be trying to repeat this pattern.

Or, it could signal significant investor confidence in the London property market and be a clear sign that prices can actually sustain current levels and all talk of a bubble is merely that.

In the wake of strong house prices, Countrywide, the UK’s biggest estate agency chain, also floated on the stock market earlier this year. The company owns nearly 1,000 estate agent branches across the UK through brands such as Hamptons and Gascoigne Pees. However, as an indicator of house prices, it is less insightful as its performance (and share price) can be distorted because it has exposure to the property market across the UK.

Foxtons, on the other hand, gives a very good insight into the London market specifically. Their revenue is almost 50% from sales and 50% from lettings, so they represent a very good barometer of how the London property market is performing. In fact, their share price has the potential to be a big market indicator.

My focus is now on what the share price will actually be and how the shares trade in the aftermath of the Initial Public Offering (IPO) – investors will surely be hoping they don’t collapse as we’ve seen with other big IPOs such as Facebook.

If you have a question you’d like Jo to answer please email info@sppropertygroup.com or tweet her @joeccles.