US-bound Purplebricks shares surge but Brexit-hit high street estate agents suffer

Estate agents were among the hardest hit stocks immediately following the Brexit vote on June 23, 2016 with investors panicking about the impact of leaving the EU on future property transaction volumes.

Several months later, the picture for the majority of London Stock Exchange estate agents would – to use their language – benefit from considerable improvement.

Of the four agencies listed on the FTSE main index, only Savills (SVS) has fully recovered from the sector’s Brexit bear market. The others, Foxtons (FOXT), LSL Property Services (LSL) and Countrywide (CWD) are in far less desirable neighbourhoods.

On the AIM, Hunters (HUNT), M Winkworth (WINK) and Martinco (MCO) are still suffering the Brexit blues, while the disruptor online estate agent Purplebricks (PURP) has become hot property.

Here are the share prices of the eight major listed estate agent stocks for the past year with the referendum day benchmark highlighted:

Please note all figures represented in the graphs below are correct as of market opening on Monday, February 27, 2017. For the latest share prices see the London Stock Exchange website.


Purple patch for the leading online estate agent

Purplebricks, the online estate agent, raised £50million from City investors last week to finance an ambitious US launch later this year, and saw yet another Brexit busting share price surge.

High street estate agent stocks must be looking at Purplebricks and turning green with envy as the traditional players continue to suffer a post Brexit vote price slump.

Purplebricks listed on the London Stock Exchange AIM in December 2015 with a share price of 100p and has steadily grown to substantially over double that value (at the time of writing). The cash call late on February 22, 2017 gave investors a few hours to snap up shares and they duly piled in, adding to Purplebricks’ enviable position as one of only two UK estate agent stocks that are looking stronger post EU referendum (the other being FTSE listed Savills).

The US expansion plan is not the only time the online agent’s price has shot up in recent weeks.

In late January, despite the property sector’s post EU referendum slump Purplebricks Tweeted that it was experiencing a record month for sales and valuations.

Shortly after the Tweet went out the Purplebricks share price shot up 7%…coincidence? Maybe, but apparent concerns among City regulators that the Tweet may be seen as casually revealing price sensitive information (which would be against stock market rules) led to the company issuing a statement within days declaring it was “not aware of any reason” for the sudden leap in value.


The controversial Purplebricks Tweet

But that wasn’t the end of it – this rather awkward sequence was then following by another clarification statement a few days later: “The board confirms that, as expected with the start to the calendar year, the company has seen a record monthly valuations and instructions activity in January, as mentioned in a tweet by the company on January 26.”

Purplebricks came out of it looking slightly naive as to London Stock Exchange conventions, but its share price hasn’t suffered as a result – in fact it’s reaching record levels. This trend is not just down to one upbeat Tweet, it’s an upward trajectory that began in early December.

Tricky moments with regulators aside, it’s happy days for Purplebricks, who have bounced back from the property sector’s post-Brexit bear market in in spectacular style, and whose price currently sits more than double its level at AIM launch.

The anncouncement that Purplebricks is planning to expand into the potentially massive US real estate market has pushed prices higher still.

Diversity is the secret of Savills’ success

Unlike a pure estate agent that relies on simple property transactions to generate reveue, Savills has a wider range of business activities plus an international reach. There is Savills’ strategic alliance with Trammell Crow Company, a leading North American property services provider, as well its own financial services division, market research division, property consultancy and a specialist fund management division. Clearly not having all your eggs in the British property basket is a strength in the post-referendum world.

Purplebricks’ Brexit-bucking bull run is more of a mystery. The Twitter effect may have helped but cannot explain why the company’s price has rocketed since early December. Perhaps the market is getting increasingly excited about the prospect of Purplebricks ‘doing an Uber/Airbnb’ – in other words entering a traditional offline industry and rewriting the rules. Especially so considering the online agent is heavily backed by star fund manager Neil Woodford who has a reputation for picking winners.

If so, the fact that Savills is also now a major investor in another online estate agent, YOPA, may not have done their share price any harm either.