Trading figures from property website Rightmove and up-market estate agent Savills provide firm evidence of the underlying strength of the housing market, as reported by Citywire in an article by Companies Correspondent Cliff Feltham published on their website. Shares in both firms rose sharply as they delivered reports of robust trading despite growing concern that the property market is becoming over-heated, especially in London.
Rightmove, 20% owned by Britain's largest estate agent chain Countrywide, advanced 39p to 430p compared with last year's float price of 335p. At the current level, Rightmove is valued at £545 million. Savills rose 17p to 674p giving the firm a value of £911 million. The shares were 480p in July.
Although it took a hit when the government performed its U-turn on Home Information Packs, property web site Rightmove has more than recovered. The Milton Keynes-based company now expects sales for the year just ended to be up 85% on last year at around £33.6 million with profits better than expected at between £17 million and £17.4 million. The number of estate agent customers has risen 31% to 11,200 or 83% of the total in the UK. In addition, 18 out of 20 builders of new homes use the website to advertise their developments. The company pushed through a price increase earlier this month with 5,500 existing independent estate agents now paying £250 per office per month, an increase of 28% on last year's £195. Despite the rise, around 93% agreed to pay up which broker Numis describes as a 'testament to the pricing power of the website'. The broker is lifting its estimate of profits for 2006 to £17.5 million and upgrading its 2007 forecast to £26.5 million. Countrywide's stake in Rightmove will evaporate under a proposed 3i management backed bid for the agency. Shares in Rightmove held by Countrywide will be distributed among existing shareholders which should help to improve liquidity in the stock.
Savills, the up-market agency which also has an active commercial property practice, prompted an upgrade by some brokers after delivering a strong trading update. The firm said residential markets had shown strength throughout the year despite higher interest rates with price growth 'approaching 10% during 2006 and substantially higher turnover than in 2005'. "London and the south east have seen the strongest markets, most notably in central London markets where price growth reached an average of 23.9% over the year," chief executive Aubrey Adams said. The firm increased its penetration at the top end of the market by snapping up rival Chesterfield. The group's property management and consultancy businesses also performed well. Numis, which has a price target of 720p for the shares, lifted its 2006 profit forecast by 8% to £71 million and its 2007 estimate by 4% to £76 million.
