Hedge funds up bets against luxury London property

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Hedge funds have upped their bets against London’s luxury homes market in the latest sign of overheating in the capital, it emerged today.

Earls Court developer Capital & Counties has become the latest target for short-sellers, a couple of months after hedge funds began to circle luxury housebuilder Berkeley Group, the Standard can reveal.

Filings from the Financial Conduct Authority reveal Boston-headquartered Wellington, one of the world’s biggest asset managers, has built a short position of 1% in Capco.

Last week, London-based Marshall Wace took out a short of 0.5%, the level at which the City watchdog must disclose bearish bets. 

Data from Markit suggest that as much as 5.1% of shares in the FTSE 250 group are now on loan, up from 1% in January — a wager worth more than £140 million.

Markit said it could mean funds were either hedging or shorting the stock. 

In February, Capco admitted sales had ground to a halt on the second phase of its Lillie Square flats complex in Earls Court. Its shares have slumped almost 20% this year, making a killing for short-sellers. 

Capco, led by Ian Hawksworth, declined to comment on the increase in short-selling.

It comes amid concerns about a glut of homes in parts of the capital, with inflated prices and new stamp duty rises on buy-to-let homes scaring off potential buyers, especially from overseas.

Last month, Morgan Stanley warned prices of new, upmarket London flats could fall by as much as 20% this year, meaning Capco might delay pre-sales until the market has improved.

Liberum’s David Brockton suggested Sadiq Khan’s plan to make half of new homes in the capital “genuinely affordable” if he becomes mayor could also have contributed to the rise in Capco short positions. “Sadiq is on record as having reservations about the direction of Earls Court,” the analyst said.

Sadiq Khan’s campaign video

Simon Stone, the Candy brothers’ former right-hand man and head of Stone Real Estate, said many people in the industry are blaming the stamp duty changes for pricing pressure. 

“Many new-build developments rely heavily on buy-to-let investors, so the further increases which came into place last week could add further unwelcome pressure,” he said.

At Berkeley, short bets trebled in the past month and account for £250 million, or 6%, of shares rather than 2% previously. The FTSE 100 group which is behind the Riverlight development in Nine Elms, has attracted short-sellers since February. Crispin Odey’s firm Odey Asset Management has the largest short stake at 1.2% worth £55 million.

Source Article from http://www.standard.co.uk/business/hedge-funds-up-bets-against-luxury-london-property-a3219296.html

April 7, 2016 |
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