Peel Hunt, the City investment broker that has worked closely with Purplebricks, has issued an investment note to clients with a pessimistic outlook for traditional agents.
“Weak transaction volumes, ongoing fee pressure, and the threat of losing a chunk of income from lettings fees continue to weigh heavily on the traditional agents. The comparatives against 2016 transaction volumes have eased as we move through H2 2017, but there are few signs of any significant pick-up in activity” says the note.
In the same note issued yesterday morning, Peel Hunt said it was maintaining its ‘buy’ recommendation for Purplebricks.
Back in April, Peel Hunt issued a 34 page investment note to its UK clients, heaping praise on Purplebricks for having “firmly established itself as a major player in the UK estate agency market” and for its growth rate in Australia up to that time.
It also forecast that Purplebricks’ share price - then around 300p - could rise 50 per cent or more thanks to its expansion into America; that is indeed what happened, with the agency’s share price exceeding 500p at one point before slipping back in recent weeks.
Yesterday’s note from Peel Hunt, which has also advised firms in the new-build sector, said that the possibly-uncertain future of Help To Buy and the recent adverse publicity over leasehold tenures would not necessarily have a significant impact on housebuilder shares.
“We believe the government will make changes to the HTB scheme (with modest cuts to equity percentages and house price limits), but that it will be extended out beyond 2021, maybe as far as 2027 (which the Labour party has suggested)” says the note.
It continues: “On leaseholds, we suspect the government will adopt the Nationwide Building Society’s proposals of ground rents being set at no more than 0.1 per cent of the selling price, and any increase must be RPI or less. If this was the case, the impact on the sector would be minimal.”
Earlier this week Countrywide’s share status was relegated to 'underperform' from 'neutral' in Credit Suisse’s generally-pessimistic assessment of UK estate agencies.
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With a big wadge of investment capital It's easy to build a budget online agency in a rising market when you can put little effort and marketing cost / duration into selling the house. The market has been like that since 2009. When the cycle changes and houses don't just sell because they are on rightmove and you have to put some effort into it; then watch what happens as the cost to income ratio changes. That time is just starting now. By the way, why even publish comments by someone linked to a company.....
Read the comments and advice of Peel Hunt, with their vested interest and then immediately below, those of Motley Fool. Why the great disparity?
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