Foxtons (FOXT) floated on the London Stock Exchange today, valued at £649 million with a share price of 230p. But within hours of debut on the stock market the shares rose 24% to 285.5p, proving that both the investment and housing market are in rude health.
Earlier this week, the Government sold off a slice of its ownership of Lloyds Bnkaing Group (LLOY) - taking its stake from 38.7% to 32.7%. The Government received a stake in Lloyds in October 2008 when it bailed out the failing back to the tune of £21 billion following the disastrous merger with rival bank HBOS. News of the sale caused both Lloyds shares and the FTSE 100 to bounce.
Foxtons chief executive Michael Brown, said: "We are delighted that our initial public offering has been successfully received and there has been strong interest from investors.
"We welcome our new shareholders to Foxtons and we are looking forward to the next stage in the development of the business as a listed company."
The success of the floatation is in part due to the strength of the UK housing market. Gross mortgage lending held steady in August and was an estimated £16.6 billion, according to the Council of Mortgage Lenders (CML). This is almost identical to July’s gross lending total of £16.7 billion and is 28% higher than August last year, when mortgage lending totalled £13 billion.
CML chief economist Bob Pannell said: "We are beginning to experience a healthy and broad-based recovery in mortgage lending activity. We attribute much of this turnaround to the improvement in funding markets generally, and also to the Funding for Lending Scheme. The Bank of England’s approvals data suggests that the positive tone for house purchase and remortgage lending will continue.
"One tell-tale sign of a recovering housing market is the re-emergence of concerns about a housing boom. But, as we have argued elsewhere, the housing market recovery to date appears fairly unexceptional in nature, at least compared with that of the early-mid Nineties".
The housing market has been buoyed by several Government scheme to encourage first time buyers onto the housing market, and existing homeowners to upgrade their homes.
In August of last year, the Government launched the Funding for Lending scheme, which was extended earlier this year. The Funding for Lending Scheme (FLS) offers lenders access to cheap finance. Banks and building societies are able to tap the Bank of England, which runs the scheme, for cheap money and in turn offer lower mortgage rates to customers. There have also been two Help to Buy schemes in which the Government will act as a guarantor for a mortgage in order for someone on a low wage or with a low deposit to buy a property.