Monday, 29 February 2016

Monkey business

The Chinese year of the monkey runs from 08 February this year until 27 January 2017. On the evidence of how the non-Chinese new year has started, we would all be wise to adopt the traits of those born in the year of the monkey who are said to be smart, wily and vigilant.

The geopolitical and economical headwinds of the end of last year have only gathered momentum in the first two months of the Gregorian calendar’s 2016 and we’re advised to batten down the hatches.

There has been a spate of worrying economic stories.  The announcement in early February that Yahoo is to cut 15 per cent of its workforce following losses of over US $4 billion came on the same day that Ford confirmed job cuts in the UK and Germany in a bid to save US $ 200 million per annum.  

While Yahoo’s situation could be pitched as the inevitable digital shakedown, Ford’s focus is raising alarm bells. 

News that the cost to insure Deutsche Bank’s debt had risen by 182 per cent in the previous three months and its immediate share price collapse of 40 per cent in the wake of the announcement followed the Yahoo and Ford bad news day.  While Deutsche Bank announced later in the month that it was to buy back US $5.4 billion of its debt saw its share price recover a bit, it has done nothing to silence those bells ahead of the UK banks’ results reporting season which is underway.  

Oil continues to occupy the headlines among the cacophony of economic bellwethers. The vocabulary of the current oil crisis is yet to echo the style of the crises of 1973/4 and 1979.  In the early 1970s, the crisis saw a rise in the price of oil following OPEC’s embargo on supply to the West and Japan. While in 1979, a panic about the potential for a drop in supply after the Iranian revolution artificially drove up the oil price.  Now, the controlled over-supply of oil has seen the price nosedive and the stockmarkets shudder.   

While a low price for oil is good for consumers, it’s bad for those states whose sovereign wealth or whose credit worthiness is based on the production and consumption of oil.  It is also bad for those financial institutions who have counted on the positions of those nations not being what they are now. It may well end-up bad for consumers should these new positions become entrenched.

On the domestic front, it can only get noisier as a re-negotiated EU agreement does or does not play out with UK voters and businesses ahead of the in/out referendum.

In the property world, many investors and occupiers might well delay their decision-making pending the outcome of the EU referendum. This will have an impact on sentiment and activity the nearer the vote draws.  

UK plc will survive whatever the outcome. Thankfully, it will still offer one of the most transparent and sophisticated property markets in the world and, as HSBC’s announcement to retain its HQ in our capital city affirms, London remains a global financial centre, not just a European one.

Will Mooney MRICS

Commercial, Cambridge

Farmers, Basic Payment Scheme and fraudsters

Many farmers now receiving their Basic Payment Scheme money are being targeted by fraudsters.

Getting to know a few of the tricks the criminals use can make all the difference and I set out below a few useful tips to counter the threat.

Farmers are often targeted through phone calls or emails from individuals who claim to be from the customer’s bank, a business customer, or even someone in authority from within their business. The aim is to trick you into making payments, or for you to allow them to access your systems so they – the fraudsters – can collect your money.

Steps you can take to help protect yourself from the fraudsters include:

Validate requests: You should never receive a phone call from someone asking you to make a payment. If you do, independently source the contact details of the person they claim to be. Similarly, if you receive an email asking for payment or notifying you of a change in bank details, get in touch with a contact you know using independently sourced details and check the request was genuine. Email addresses can be impersonated and made to look like they’re from a genuine contact.

Watch out for impersonators: Sometimes a fraudster might attempt to impersonate someone within your business, or a trusted contact such as a bank. Take the time to make sure callers are who they say they are and be wary of caller displays on your phone. Fraudsters can and do use systems to display a number that may be known to you. 

Be wary of information seekers: If someone calls you asking for information that you’d expect them to already have, be on guard. For example, your bank will never phone or email asking for account details, passwords or online banking authorisation codes.

Look out for unusual transactions: If you receive a payment into your account that you aren’t expecting, check it out. If it’s not yours, make sure that the funds are cleared before returning them, and that they go back into the account they came from. Your bank should be able to help you with this.

Keep secrets: Never give out your online credentials, PINs, passwords or authorisation codes to anybody who calls, emails or texts you.

Don’t be rushed: Criminals will often express urgency and offer inducements to make you act quickly, so make sure you take the time to thoroughly check any requests to make payments or to amend payment details. Ignore any requests to move money to a new account to keep it safe, as your bank will never ask you to do this.

It is a sad state of affairs but it seems the answer is to never trust anyone who contacts you by phone or email unless you are absolutely certain you know who they are and why they need the information they are requesting.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

Thursday, 25 February 2016

Don’t panic! There’s more to investment than Stamp Duty penalties

The property press and wider media have been full of the 3% Stamp Duty levy that comes into effect on buy-to-let and second home purchases from April 1.

The Government has finished a consultation exercise on these legislative changes but one thing that hasn’t ended is the rush from buyers who want to beat that deadline.

Investment decisions should be based on much stronger grounds than whether or not you can get ahead of a deadline to beat a hike in Stamp Duty. Frankly, it only takes investors roughly back to where they were before Chancellor George Osborne altered the way Stamp Duty was levied at a stroke during his 2014 Autumn Statement. Everyone was happy to ride with the tax before that, now they all appear to be jumping off the buy-to-let bus because the temporary respite is evaporating.

It’s doubtful now whether many conveyancers will be able to complete their task by March 31, even with superhuman effort. The week running up to the deadline also contains the Easter weekend with two Bank Holidays on top of the regular two day break.

It’s better to take a long-term view and survey how the property market has performed where you want to make your investment. There are other things to consider, too, such as affordability and the way write-down will affect offsetting some charges for things like furnishings.

In London, I have a couple of good examples of properties in Fulham, both in the same apartment block, that illustrate buy-to-let should still be worthwhile.

The sale of one flat has just completed for £855,000 - it sold for £550,000 in November 2010 so illustrates a compound growth of 9.3% year on year. Working from that base, at the same growth rate it would be worth £1.33m in another five years and even at a modest forecast of 3% compound it would achieve £991,000 over the same period.

As well as that healthy capital growth, it would let for £550-£600 per week, a valuable return of 3.34% on top of the value growth. With such uncertainty in equities, residential property makes a better home for savings than any ISA, some of which are barely making 1.5% and all of which have low investment limits, even allowing for tax on the interest. Ignoring the income, the capital growth projection at 3% equals more than five times the extra Stamp Duty, which may well be offset against future capital gains. 

A second flat, on the market now at £750,000, lets for £465pw and would have been worth circa £500,000-£525,000 five years ago. With compound 5% growth it would be worth £957,000 in five years (£869,000 at 3% compound). Again the sums of yield and capital growth more than add up.

If you believe the London market distorts the view, or just because you live elsewhere, there are other examples that illustrate the point.

For example, let’s move to the old Terrys chocolate factory in York which is being converted into apartments; the developers limited the number of buy-to-let sales so there will always be a good mix of owner occupiers and tenants. They believe it will improve the look and feel of the site as well as limiting competition for tenants and, at the same time, avoid pushing down incomes for investors.

Prices range from £180,000 to £1 million so the smaller-priced opportunities open big doors for investors.

From a buy-to-let perspective, the smaller apartments represent a very good investment – a purchase price of £180,000 will return a monthly rental of around £750 and a yield of 5% but added to that the capital growth is likely to be 3-5% per year until the development is completed. At that point, there is often a sudden jump in values as the supply of properties dries up and the site finally looks its best. In previous cases this jump has been anywhere from 5-10% as the site comes to look its best and all facilities are installed.

It’s clear that a 3% one-off panic by some investors is masking a much larger percentage opportunity. The MPC at the Bank of England has just given us a Manchester United away score line of 9-0 against raising Base Rate and some pundits are predicting it may actually fall below its historic low of 0.5% during the last seven years and won’t see a rise before 2018.

The warning here has to be that buy-to-let is a long term investment, so build into the equation the effects of an eventual rate rise when you decide on affordability. It is a business decision, even though it may be your pension driving your thoughts, and should be approached with a definite appreciation of profit and loss possibilities.

But my advice is to talk to your nearest Carter Jonas office.

Use our Stamp Duty Calculator to determine the amount of tax you would pay on a second home by clicking here.

Lisa Simon, 
Partner Head of Residential Lettings
T: 020 7518 3234 

Wednesday, 24 February 2016

Countryside Stewardship

Countryside Stewardship is the new overarching scheme under which agri-environment, catchment sensitive farming and Woodland Grants will be made. 

Its launch last year was widely regarded as totally chaotic, with some guidance notes arriving after the application deadline had closed.  So it was testament to the pioneering nature of many farmers and their advisors that 2,344 Mid Tier and 326 Higher Tier applications were submitted. Having said that, Natural England is still working through these applications despite the start date of the schemes being January 1, 2016.

However a number of new grants and initiatives have, or are about to open that may interest  farmers in these straightened times despite last year’s applications still needing to be sorted.

On February 1 the Hedges and Boundaries Capital Grant scheme opened which is a stand-alone application process under the overall banner of Countryside Stewardship.

The maximum grant available is £5,000 per farmer and the application period closes on April 30.

There are 12 capital items available with different payment rates which include grants for:

  • Hedgerows: planting, laying, coppicing, gapping up and supplements for casting up and top binding and staking
  • Earth bank restoration
  • Stone faced banks: repair and restoration
  • Stone walls: restoration and supplements for top wiring and stone from quarry
The supplements can only be applied for with the associated capital item, and photographic evidence will be required before and after the works take place.

While on a rather grander scale, the CS Facilitation Fund opened on January 18 with the aim of providing support to bring together groups of farmers to work in partnership to deliver CS at a “Landscape scale”.  This scheme closes on March 18.

The facilitator needs to be able to demonstrate environmental land management experience and facilitation skills.  They will be required to bring together a minimum of four landowners whose total farm area is at least 2,000 hectares and the facilitator could receive up to £12,000 per annum.   The applications are assessed on a competitive basis.

Then expressions of interest for the CS Higher Tier will need to be submitted during February/March.  These will be assessed by Natural England with those which are approved being worked up in to full applications between June and September for the actual agreement to commence on January 1, 2017.

Finally, the Mid Tier application manual with online “priorities option tool” will be available from mid March which hopefully will help farmers understand what Natural England are looking to achieve, thereby making the application process which runs from June 1 to September 30 more straightforward than last year’s. 

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

Wednesday, 10 February 2016

The Groceries Code

Farmers are facing tough enough times without supermarkets exploiting their dominant position in the supply chain.

The Groceries Code Adjudicator (GCA), Christine Tacon has investigated Tesco and found it “seriously breached” the legally binding Groceries Code, as many suppliers have suspected for years.  

The Groceries Code sets out the rules on how supermarkets should treat suppliers and the GCA found that through various means Tesco had contrived to delay or reduce payments to suppliers to keep their profits up.  Such delays can put real cash flow pressure on small suppliers and it is absolutely outrageous that Tesco has been allowed to get away with this for so long. 

Tesco is now legally obliged to take action to implement the changes recommended by Tacon but because of the unaccountable delay in the government giving the GCA its full powers, Tesco cannot be fined for its breaches.  

If significant fines could be levied, supermarkets would think very carefully about how they treat their suppliers, especially when their own profits are under pressure.

Tesco are also under investigation by the Serious Fraud Office (SFO) because of their £326m overstatement of profits last year, much of which appears to be tied up with the manner in which money was accounted for in the supply chain. I assume that if found guilty, the SFO would have the power to raise a fine, unlike the GCA.

I understand that Tesco has already started to clean up its act which will be good news for their suppliers but it is very depressing that it has taken so long for unscrupulous trading practices to be brought under control, despite many suppliers complaining about their treatment for years.  

Whenever there is such a disparity in “power” between a buyer and supplier there is always a danger that the dominant party will exploit their position.  Unfortunately this is bad news for farmers because they very often find themselves in a weak bargaining position at the bottom of the supply chain.

The government needs to equip the GCA with full powers to fine organisations as soon as possible.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

Thursday, 4 February 2016

The Rural Payments Agency has fallen short of its pledge

Sadly it is no surprise that the Rural Payments Agency has fallen short of its pledge to make the new Basic Payment to the “vast majority of farmers by the end of January”.  

By January 27 approximately 70 per cent of claims had been made but this represents only about 60 per cent of the total payments, indicating that the majority of claims left to be paid are the larger ones.

The NFU said: “Our top priority is to get money owing paid out to farmers as soon as possible. We are also working with the RPA to try to ensure that lessons are learnt and 2016 sees a far smoother delivery. For the latest on BPS and our work on behalf of our members visit”

My experience support sthe evidence above in that there was a flush of payments made very early in December to small or simple applications where no changes were made to the mapping information and since then the number of farmers being paid has dwindled with many of the bigger and so called more “complicated” claimants left waiting.

That is not to say the RPA staff are not working hard because I have had emails from them on Sundays, but they are only just starting to process some of the information which was submitted last June.  

One of my recent communications from the RPA was about a plan submitted with the application form which has obviously been lost. I was able to scan a copy of the plan I had retained on file and email it straight back to them, but the plan should not have been lost in the first place and it had taken seven months to discover it was lost.  

This of course will result in a delay in my client receiving his payment and he will not want to pay me for my time dealing with the RPA’s inefficiency.  So everyone seems to be losing out, which is a familiar tale for anyone involved in dealings with the RPA over the years.

NFU vice-president Guy Smith said it was impossible for farmers to run their businesses without knowing when they would be paid, adding: “Defra and its agencies must be more transparent and clear as to when they think this money will go out, rather than hiding behind a veil of confusion.”

In a recent press statement, the RPA chief executive, Mark Grimshaw said: “We understand the importance of BPS payments for farmers and our priority has always been to pay as many farmers as quickly as possible.”

Mr Grimshaw went on to say the RPA is working seven days a week to make payments and that a wide range of claims had been paid to small, medium and large enterprises. He also said claims would continue to be paid as they were checked and completed - let’s just hope those checks can be completed quickly because it will not be long before many will be starting to think about this year’s claim.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381