PropertyAug 9 2018

Falling share prices a warning sign for housing market

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Falling share prices a warning sign for housing market

The recent sharp falls in the share prices of UK estate agents is a portent for a severe downturn in house prices, according to Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford.

Mr Davis said the stock market typically predicts the happenings of the real economy. He said: “The price moves before the reason becomes clear. For example, you may recall global stock markets peaked in late 2007.

"The recession was 2008. Stock prices troughed early 2009. The economy picked up steam from 2010.”

The shares of Countrywide have fallen £3.49 to £18 over the past month, while the shares of Foxton’s have fallen from £96 to £60 over the past year.

Mr Davis said: “Of course, there can be myriad reasons why these shares have collapsed, being some 90 per cent down on the highs.

"However, anyone trying to convince me it has nothing to do with the housing market gets extremely short shrift.

"We have to wonder, what do stock market participants see, and what are they telling us about their expectations for the housing market and house prices? To me, it suggests, strongly, they see extreme weakness in both the market and, therefore, prices.”

Mr Davis has been cautious on the outlook for the UK housing market for several years, and describes the help to buy scheme introduced by George Osborne in 2013 as “ghastly and communistic”.

He commented: “According to the most accurate analysis (that of The Land Registry), London prices were flat to down since early 2017. Anecdotally, we are seeing asking prices fall right across the board and this suggests sizeable falls in prices to come, over the next year.”

He said the most important question advisers should be asking their clients right now is whether they are over invested in UK property.  

Lucy Pendleton, who runs estate agency business Lucy Pendleton and Co said the headline figures about house price falls in London had been amplified by stark falls in certain boroughs, such as Westminster in central London.