A tale of two London housebuilders this week.
Mid cap Berkeley Group has been one of the sector’s major long-term success stories. I first met its chairman Tony Pidgley over 25 years ago and he’s widely regarded as an industry sage.
That’s because he has a great record of reading the property cycle, as well as being a brilliant developer. Most famously he sold all Berkeley’s land and housing exposure in 1988 and bought back in after the market had crashed. An extraordinary thing to do in the context of a publicly listed company.
Mr Pidgley is now buying his own shares in the belief ‘that the share price materially undervalues the company’.
That’s a really interesting observation. One reason why the stock market disagrees with him is the pricing pressure at the prime end of the market where Berkeley operates.
Brexit, stamp duty, and buy-to-let tax changes are some reasons cited for this; but I suspect prices have simply run well ahead of themselves. Even so, experience suggests betting against Tony Pidgley is a brave thing to do.
Clearly he thinks the London property market is fundamentally OK, despite that recent volatility at that prime end.
This week I spoke to small-cap Telford Homes which operates in the ‘mainstream’ London market, which means it builds £500,000 apartments.
Telford has noticed no slowdown in demand or pricing pressure in this segment. If Tony Pidgley does indeed turn out to be right, then Telford’s shares are very cheap too.