Private estates

Private equity firms are turning their attention to British estate agents. Last month, US buyout firm Apollo Management agreed to acquire Countrywide, Britain's largest agent for an estimated €1.6 billion ($2.2 billion), while BC Partners agreed to buy Foxtons, another prominent industry player, for approximately £390 million.

The timing of the two deals comes as a bit of surprise. Like Spain, British house prices have enjoyed a phenomenal bull run for more than a decade, but with interest rates at a six-year peak of 6.5 percent, there is an expectation that the market will cool.

However, some of the most recent data suggests otherwise. From April 2006 to April 2007, the price of an average property in the UK rose by more than £20,000, according to research from property advisory firm Assetz. And the average annual rate of growth was running faster in April than it was in March—11.1 percent compared to 10.4 percent, the firm said.

In Britain, residential demand is still being fueled by a housing shortage and increases in immigration. The success of estate agents riding the wave is clear. In March, Countrywide reported underlying profits had tripled to £102 million for the whole of 2006. In delivering the results, company chairman Christopher Sporborg said that he anticipated a slowdown in the rate of growth in housing prices, but he foresaw no decline in transaction volumes.

In London, price inflation has been more dramatic than anywhere else in the UK. Fueled in part by large bonuses in the financial sector, prices in central London, for example, increased by more than 33 percent in the 12-month period through April, according to estate agent Knight Frank. Foxtons, a London-based estate agent which derives fees from renting and selling properties, has certainly benefited. The firm has been expanding recently with new offices in Kingston, Sloane Square, Muswell Hill and Shoreditch. Its new private equity owners are hoping to capitalize on that momentum.

Last year, Rupert Dickinson, the chief executive officer of Grainger Trust, the largest listed residential property firm in the UK, told The Financial Times that he anticipated continued growth in the sector. “If there is a limp situation that may be one thing,” he told the paper. “But I think the UK market will not see price depreciation for years and years. There is still going to be a demand.”