It was only two year since FOXT or Foxtons, an estate agency in London, was dubbed as short sell because of the floating incident. After that, there was a considerable rise in the earnings after the surge in the London real estate market. Despite the fact of the increase in the property market, there are still some problems occurring which can be viewed as the very reason why stocks continue to fall and should be given more focus.
According to the chart of Foxtons, there was quite an excitement with its sudden rise to 400p last year but then it fell greatly within the same year and ended up to be 148p. The first half of the current year has proven to be a good one for the company because of a slight increase which resulted to 285p. There was an update regarding robust trading last month and yet the price went downhill and is now at 189p.
Foxtons is based in London and focuses more on residential properties but the sales revenue are not even equal to the lettings while mortgage broking has shown to have added a small amount to the total profit. The price of the stocks on the market continued to decline after CWD or Countrywide has issued a statement regarding the expected 14 per cent of sales drop which is based on the UK. The prime central location in London is now being used as an asset in order to increase the prices in UK housing.
According to a data set globally, housing market in London is considered to be the most overvalued. The bubble index set by UBS has rated London at 1.88. Because of the previous rating in 1985 to 2009, it was expected that whenever it reaches more than 1.0, a correction of 30 per cent will take place between one to three years.
Supply in housing is said to be lacking according to politicians, press and estate agents but there are obvious homeowners who have been trying sell for year with no progress. Because of the recent property boom, there are now many property owners who are embarking on projects such as home extensions and improvements in order to profit more. The home extensions and improvement tactic is not only present in London but in other places as well such as Perth.