Markit says margin pressure may hit UK house builders

Hedge funds and asset managers have taken short positions on a number of house builders, specifically those exposed to the stalling London property market, according to data company, Markit. An analyst from the company reportedly told CNBC that Markit's proxy to indicate short selling in UK home builder Berkeley recently hit 5%, the first time a since 2010, with Redrow (2%) and Telford (1.6%) also up slightly. However, other analysts believe Berkeley has a strong investment case and are less convinced the stock will see a large movement lower.

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Economists and central bankers have warned about bubbles in several of the world's key property markets, but it appears investors are now expecting just one to burst in the near future.

London has been on the radar for many "short sellers" - traders who bet that a particular security will fall in price - with even the Bank of England Governor Mark Carney talking of stretched valuations in the capital. But, it now appears these hedge funds and asset managers are putting their money where their mouths are.

"U.K. homebuilders have seen their first bear raid in nearly five years as luxury London property prices stall," Simon Colvin, a research analyst at data firm Markit, said in a note on Tuesday.

Filings to the U.K. financial regulator show that it's the London-exposed housebuilder Berkeley that is peaking the most interest. Firms like Anchorage Capital Master Offshore, BlueMountain Capital Management, Gruss Capital Management and Marshall Wace have taken short positions but either declined to comment or were not immediately available for comment when contacted by CNBC.





Spike in interest

Relte Schutte, an analyst at Markit, told CNBC via telephone that there had been spike in interest in Berkeley in the past week. Shares outstanding on loan - a proxy that Markit use for short selling - has risen to 5 percent — the first time a U.K. homebuilder has hit this level since 2010, according to the company.

Others currently seeing a slight increase in short selling include Redrow and Telford with 2 percent and 1.6 percent of shares on loan respectively, according to Schutte.

London has long been a global hub for property investment, benefiting both from the city's status as a global financial hub and a perception that its real estate is a "safe haven" investment. However, demand for London properties began weakening last year, due to increases in the taxes levied on buyers of properties worth more than £1.1 million and many have pointed to uncertainty over an upcoming referendum on its membership of the EU.

Indeed, the Royal Institution of Chartered Surveyors said last week that London house prices look set to stabilize after sharp periods of inflation. It also said that price expectations had turned negative in prime central parts of the capital, adding that "zone one" properties in the heart of the city were showing signs of downturn.

Next 'big short'?