Building Companies and Land Valuations
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Building Companies and Land Valuations

Building Companies and Land Valuations


Trading Features / Strategies from Simon Denham of Capital Spreads.

With much of the market looking for any good news at all it is not surprising that investors continue to sit on their hands, on the one hand fearful of how far UK plc could actually fall and on the other wary of buying into mining and oil when valuations have increased so much over the past few years.

The drip, drip, drip of bad news was replaced by a veritable deluge yesterday. The building and property sectors plumbed to new lows on figures showing that house viewings and sales for the last three months were actually significantly lower than the worst period of the last house price slump back in the early nineties. The really worrying fact about this is that this is all going on whilst the actual economy is still growing (ok, admittedly not fast but still in positive territory).


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Buyers of builders like Persimmon are as rare as hen’s teeth at the moment and a whole swathe of analysts put their heads above the parapet yesterday to slag off the sector. Frankly a bit late now guys as most of the equity is already between 75 and 90% off the highs. The sound of stable doors being slammed after the horse has not only bolted but actually died of old age is almost deafening. The headlines make for grim reading as most of the builders now have debts of multiples of their share capitalisation and this will make it very difficult for them to arrange for refinancing from the banks at anything other than ruinous levels. Cash rich entities must be licking their lips at the very real prospect of land banks being auctioned off at fire sale prices.

Oddly enough the huge valuations of the supermarket land resources do not seem to have been quite so violently attacked. One of the reasons for the Delta bid for Sainsburys was on the value of the land on which the stores actually sat (plus land bought for expansion). Whilst it is a truism that in tough times only the strong will survive (and you don’t get much stronger than Tesco, Morrison, Sainsbury et al) even they may be looking at a serious revaluation of assets.

Oddly enough the sector that one would have assumed to be in the firing line as well, the mortgage lenders (banks), actually had a reasonable day yesterday. After an initial shift lower on the open hard pressed investors will probably be hoping that all the bad news and more is already in the price. Unfortunately we have had a series of false dawns for the banks as markets have digested bad news and thought “ok! that’s it, we can buy in now” only for the next mini crisis to develop.

The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.


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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.

'Building Companies and Land Valuations' edited by SD, updated 11-Jun-08



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The contents on CleanFinancial.com are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice.

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