Market Commentary - Housing, Infrastructure, Construction and Services
There is no directly relevant news this morning. The emerging issue on which more column inches is being devoted than usual is London house prices.
There is no directly relevant news this morning. The emerging issue on which more column inches is being devoted than usual is London house prices. The market for properties between £1m and £2m (not that expensive in London terms) has been impacted adversely by tax changes but that has not really caused issues as its not the territory in which new build is most active. The catalyst for London values to be affected and cause ripples in the market as a whole is in the £600,000 to £900,000 area and the Nine Elms development could be the focus. At present 20,000 dwellings in 14 sites are being constructed, mostly two-bedroom apartments in the price bracket described. Many are presold but the final (and largest) payments are not yet made. Finding the cash for that payment may not be as simple as expected. Many were bought when the UK was expected to be a member of the EU; we suspect that a large proportion are overseas buyers but have no data at present. The point we make is that there is speculation around house prices, especially in London and isolated spots outside and the discussion is increasingly about overvaluation in the most active area of the market.
Grafton was the only riser yesterday, up 2.6% to 514p. The selling of the stock post the interims was probably overdone in our view, down to 497p at one point. We have written enough on Grafton recently so will not add much more today. The evidence yesterday is of strong support starting to emerge but few things go in straight line! G4S was the weakest performer, down 3.1% to 233p as the support seen in recent weeks reduced a little. The stock had a quick journey up to 250p and has now come back to the level it was at post results. We believe the case for it reaching 300p is strong based on its earnings level and growth prospects and peer group valuation. It may take a few months for the market to adjust and good news on the disposals should accelerate the progress.
Galliford Try reports its Finals to end June 2016 tomorrow.
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