Monday, June 26, 2006
Rightmove: happy on the short-side
I've got only one short position, a spread-bet that shares in Rightmove, the property website, will fall.
Currently I've got my nose slightly in front but I'm expecting a big move to come any day soon. That's because the market's expectations of the future profitability of the business are based on the viability and success of Home Information Packs, new government legislation that will force people selling their homes to provide more information when marketing to potential buyers.
Rightmove is planning to earn a considerable amount of future revenue by doing the work necessary to put the Home Information Pack (HIP) together and flogging the products to home sellers. The HIP will contain legal information about the property and a report on its condition. The government is hoping that by forcing the seller to provide this information once, it will save anyone that is seriously considering buying the property from the aggravation of seeking out this information for themselves. The current system can result in a lot of duplication, as each successive buyer has to pay (and wait) for the vital information to be supplied by solicitors/surveyors etc. Most of the motivations for HIPs are honourable enough but it becoming increasingly doubtful whether they will work in practice.
Most industry groups are opposed to HIPs, from surveyors to the building societies to house builders. However, more powerful information emerged at the weekend to suggest HIPs won't work. A study by the Observer on a statistically meaningless sample of sales saw HIP provider Mysalepack give away the packs to nine house vendors (it is not known if they would have been able to sell them).
the government and industry - pack providers, estate agents, lenders and lawyers - have yet to conduct a full trial of the scheme to establish whether it works. A trial that had been planned for this month, potentially in Cambridge, has been postponed until the autumn...
it gets worse..
Jenny Short of Taunton decided to apply for a free Hip and is about to exchange contracts on her home, but the buyer's solicitor refused to accept the information included in her Hip, thus incurring costs for his clients and delaying the sale by six weeks while the conveyancing was carried out.
if this is typical it will break the HIP industry before it can get into it's stride. If buyers solicitors will not accept conveyancing information supplied by the seller, costs will not be saved and HIPs will fail in meeting their aims. Of course, the government could go ahead with it's plans but with the opposition gaining ground it's unlikely Labour would want a high-publicity fiasco less than two years from a general election.
Rightmove's share price is implying a value for the company close to £400m and the prospects for profitably HIPs looking weaker by the week, I'm (literally) betting the scheme will be watered down substantially or even better, scrapped entirely. If that news were announced shares in Rightmove would bleed from every orifice.
The Artful Dodger
Currently I've got my nose slightly in front but I'm expecting a big move to come any day soon. That's because the market's expectations of the future profitability of the business are based on the viability and success of Home Information Packs, new government legislation that will force people selling their homes to provide more information when marketing to potential buyers.
Rightmove is planning to earn a considerable amount of future revenue by doing the work necessary to put the Home Information Pack (HIP) together and flogging the products to home sellers. The HIP will contain legal information about the property and a report on its condition. The government is hoping that by forcing the seller to provide this information once, it will save anyone that is seriously considering buying the property from the aggravation of seeking out this information for themselves. The current system can result in a lot of duplication, as each successive buyer has to pay (and wait) for the vital information to be supplied by solicitors/surveyors etc. Most of the motivations for HIPs are honourable enough but it becoming increasingly doubtful whether they will work in practice.
Most industry groups are opposed to HIPs, from surveyors to the building societies to house builders. However, more powerful information emerged at the weekend to suggest HIPs won't work. A study by the Observer on a statistically meaningless sample of sales saw HIP provider Mysalepack give away the packs to nine house vendors (it is not known if they would have been able to sell them).
the government and industry - pack providers, estate agents, lenders and lawyers - have yet to conduct a full trial of the scheme to establish whether it works. A trial that had been planned for this month, potentially in Cambridge, has been postponed until the autumn...
it gets worse..
Jenny Short of Taunton decided to apply for a free Hip and is about to exchange contracts on her home, but the buyer's solicitor refused to accept the information included in her Hip, thus incurring costs for his clients and delaying the sale by six weeks while the conveyancing was carried out.
if this is typical it will break the HIP industry before it can get into it's stride. If buyers solicitors will not accept conveyancing information supplied by the seller, costs will not be saved and HIPs will fail in meeting their aims. Of course, the government could go ahead with it's plans but with the opposition gaining ground it's unlikely Labour would want a high-publicity fiasco less than two years from a general election.
Rightmove's share price is implying a value for the company close to £400m and the prospects for profitably HIPs looking weaker by the week, I'm (literally) betting the scheme will be watered down substantially or even better, scrapped entirely. If that news were announced shares in Rightmove would bleed from every orifice.
The Artful Dodger
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