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TODAY'S OTHER NEWS

Purplebricks and Foxtons could be big winners if BoJo becomes PM

Now could be the time to buy shares in Purplebricks and Foxtons if one stock market pundit turns out to be correct - because Boris Johnson could make you a fortune.

Both Purplebricks' and Foxtons’ share prices have been famously low in recent times. The hybrid agency is scarcely above its original launch price of 100p having been five times that just two years ago; meanwhile London-focussed Foxtons is around 62p having been well over six times that value, back in 2014. 

But now Boris Johnson’s pledge to slash stamp duty if he becomes Prime Minister - if he sticks to it - could be a saviour for both battered agencies according to American stock market analyst Tim Worstall.

Writing on the Seeking Alpha investment website he says the agencies would win “a huge boost” if Johnson became PM.

Worstall suggests that Johnson plans to drastically raise the threshold for paying stamp duty from its current level of £125,000 to £500,000 at the same time as lowering the top rate from 12 to seven per cent. 

Super-prime property portal Vyoom has already suggested that such a move could reinvigorate the bruised high-end property market, especially in London, but now Forstall says the same will apply to more mainstream agents’ share prices.

“Both companies are going to benefit hugely from a market which contains more transactions. Their overheads in offices etc are reasonably set in stone, more transactions and thus more fees will feed through direct to that bottom line” he says.

“Foxtons is mainly London based and there's not much property there which is under that £500,000 level. But it will of course benefit from the lowering of the higher rates. Purplebricks is nationwide, the average value (median) of a UK property being around the £250,000 mark. Removing stamp duty from the majority of the market will clearly boost transactions to their benefit.”

He adds: “If Boris gets elected PM, if he then follows through on his promise - the first being highly likely, the second being still strongly so - then stamp duty will fall to nothing for the majority of the UK housing market.

“… Sure, their recovery is dependent upon Boris keeping his word which isn't a certain thing. But a very useful speculation would be to pick up some of one or both stocks and see the effects of stamp duty reform upon them.”

You can see the full analysis here.

  • Andrew Stanton Estate Agency Insights And Strategies

    Where to begin, having seen Purplebricks, burn through 90M of its cash reserve, in a year, 7.5M a month, and the exit of the Bruce brother's and a long list of key executives in the UK and in Australia and America, and the share price dropping by 80% from its height, I am not sure why anyone would be mad enough to risk putting money into Purplebricks, who has never paid a dividend to any investor since it began trading.

    As to stamp duty - as average sale price of Purplebricks is £261,000 this attracts at present a minimal amount of stamp duty, so if Boris does become PM, and if he does play around with stamp duty, no impact here for Purplebricks.

    Regarding Foxtons - yes - stamp duty has impacted on the number of bigger ticket sales, but the imposition of extra stamp duty on second purchases is the bigger area of damage that was caused by the last government interference with stamp duty, and this is unlikely to be repealed.

    Looking forward, even if Boris does become PM and he does tweak stamp duty, and if he does achieve Brexit - will the resulting crosswinds that come - interest rates rising - and continuing big business failing with the resultant unemployment make for a vibrant housing market.

    My advice, keep your money in you pocket and do not invest in estate agency stock, you may well need a cash reserve to help weather the next 12 months of political and economic instability coming our way.



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    Wow!
    Are you bored?
    I am

     
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    The headline of this article makes no sense! Winners over who? Other agents? If so, how?

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    Check out the really useful vlogs that explain how share dealing works and what happens when you buy shares at a low price and then sell at a higher price. It's on the Ceebies channel on Youtube. Enjoy!

     
  • Michael Riley

    Foxtons is underpriced regardless of any change in stamp duty.

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    Purple bricks model might take off well in other countries where agents are extremely laid back but not so much in the UK. I don't think they have enough repeat customers which makes a company sustainable over the long term.

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    You clearly haven't heard about their success in the UK

     
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    So if they are the winners, who are the losers?

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    Really? Is that your question?

     
  • Dan Osborn

    First time buyers have zero duty up to 300k so what's stopping them now? Certainly don't need Boris the clown around.

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    So what happened to average asking prices nationally when premium London properties were selling faster than 2 bed terraces in Milton Keynes?
    Anyone?.....
    Anyone?

     
  • Sam Samuel

    Why just PB and Foxthems?

    It won't happen anyway. Far too much revenue will be lost. Just needs a full review and adjustments because the current system penalises the many

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    What??
    What needs a full review??
    Who needs adjusting??
    Who is penalised??
    Are you Donald Trump??

     
  • Babonday Brian

    Editor: how can I get purplebricks in the title today... blahhhh

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    I love that your cage is rattled whilst the other regular haters are trying to figure how many shares to buy and when to buy them!

     
  • Kristjan Byfield

    Premium market agency Foxtons makes sense to benefit from a sales market uplift from SDLT reduction, like most London agents, however don't see how PB would benefit any more than every agency would. They are not London/premium centric so impact would be limited and universal.

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    Once confidence is restored, what reason would a vendor have not to instruct the agent that does everything the old High Street model offers; but better; and faster; and at a fraction of the cost.

    Purplebricks are on the precipice of market dominance. They only need to win another 2% market share before you start losing more and more of the customers you've managed to mislead into thinking you're better. They gathered momentum in a sensitive market. Just imagine how it will snowball once confidence is restored.

    Please don't deny that Purplebricks do everything you do. I've worked with High Street agents for over 20 years. I know how you work and I know why you do it.

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    You really are the most tragic person on industry forums.

     
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    This will have no effect on a PB share price .Michael Bruce was the king of spin for this brand and he is now in his counting house.
    Foxtons however looks underpriced for a London recovery -but as always it’s a big gamble -easier shares to bet on than EAs in the current market place

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    Dont trust one or two in our area. Jumbed up flash nobs in their 4x4s and flash socks.

  • Andrew Stanton Estate Agency Insights And Strategies

    Michelle, as you seem to know all regarding purplebricks, perhaps you can confirm that at the point a new client signs up to use purplebricks, it is made clear to the client that a referral fee is in existence. If purplebricks do not disclose the referral fee, they may well be in breach of the new code as set down by the estate agency trading standards unit.

    Also, how can lpe s be self-employed if all their work is supplied to them by purplebricks, and they are trained and recruited by purplebricks, and they do no work outside the work they do for purplebricks.

    These are genuine questions, i look forward to your knowledge and input.

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