Goodbye holiday, hello Autumn!

As much as we all love and need our holidays it is always a relief for estate agents when the second week of September arrives and our buyers are back home, refreshed and, generally, raring to go – giving us a good two months to make it all happen before Christmas.

This year, however, we will be even more delighted when the outcome of this week’s momentous Scottish Independence Referendum is finally revealed. No market likes uncertainty and it has been interesting to see the impact of Scotland’s potential break-away from the UK on the property market.

Whatever the outcome is, the fact we will have a result will help in a way that endless speculation hasn’t.

This has been specifically noticeable amongst London buyers. With many of our London buyers working in the City, the financial markets’ trepidation has rippled out into ours. This, therefore, has contributed to a slackening in demand for larger family houses in the £1,000,000 plus price bracket.

With any luck, Scotland will decide to stay in the fold and we can all raise a whisky or two to a revival of confidence.

On the other hand, a sector of the market which has shown tartan-resistant strength is the retirement bracket. The demand for good village houses within walking distance of amenities, together with spacious reception rooms, a reasonable sized garden and off road parking/garaging is especially strong.

As 2014 took off with the wind fully in its sails, we confidently expected the year to continue as such. Mark Carney’s warning of impending interest rate rises certainly contributed to deflating the London market ‘bubble’. However, frustratingly, this took the puff out of the country bubble which had only just started to inflate and was a long, long way off bursting.

However, the consensus is that when the base rate does rise, it will be in incremental stages. Such baby-steps will not only be easier for householders to plan-for and manage but are also unlikely to spook the financial and residential property markets.

Looking at this positively, a gentle pulling-in of the reins should ensure a more contained, steady and long lasting growth.

Caroline Edwards
Partner
Residential Sales, Long Melford
T: 01787 888622
E: caroline.edwards@carterjonas.co.uk

The Future of Farming

With farmland prices at an all time high, now may just be the time to think about selling land if you are looking for a better return on capital value.

 

Farmland tends to provide a yield of not much more than 1-2% which reflects the low risk nature of farmland compared to many commercial property investments. But in recent years the total return from farmland has been bolstered by significant capital growth and the big question is whether this capital growth will continue as the wider economy recovers which may attract non farming investors in particular to search for higher yields elsewhere.

 

However, farmland does still have very significant tax advantages as compared to many other assets. For instance let land qualifies for Agricultural Property Relief which can provide up to 100% relief from Inheritance Tax on the agricultural value of the land. This can be a significant driver for many cash rich individuals who may be prepared to accept a low return on capital in order to shelter their money in the long term from the tax man.

 

There are then farmers themselves who are generally feeling optimistic about the future of farming following some more profitable times in recent years. Having said that it is still difficult to justify the price some farmers are prepared to pay for land considering the relatively modest profit that will be generated from farming the land.

 

But land is an unusual asset in that unlike shares for example, “they are not making any more of it” and there may be one off opportunities that arise which may not have been anticipated at the time of purchase. For instance, if one had purchased an area of poor quality land on some windswept hillside twenty years ago you would probably not have anticipated the renewable energy opportunities which are now available which could liberate both capital value and significant revenue generating opportunities. Clearly if you don’t own the land such opportunities would not be available to you and although it is difficult to quantify this in terms of value I believe owning land does bring opportunities which owning other assets may not.

 

So, there are conflicting forces at work although if my firm, Carter Jonas is anything to go by we did see an upturn in farmland sales last year where we offered over 18,000 acres of land in to the market across the country. This does perhaps indicate that some large landowners are now prepared to consider rebalancing their property portfolio by selling at least some of their agricultural land to take advantage of the record prices currently being achieved.

 

So what are the prospects for 2014? Well, it seems to me that demand is still likely to outstrip supply but the market is patchy with good sized blocks of arable or dairy land likely to attract premium prices while smaller blocks of secondary quality land are attracting less predictable demand and consequently, on average lower prices.

 

Anyone interested in discussing either the sale or purchase of farmland is welcome to contact me in Wells or Kit Harding in our Bath office who heads up our farm agency team in the South West.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Environment & Rural Growth

The farming industry in general has welcomed DEFRA secretary, Owen Paterson’s decision to reduce the proposed 15% shift in payments from direct payments to farmers to the environment and rural growth. It had seemed the government was committed to the 15% shift in their consultation document on CAP reform published earlier in the autumn, but they have listened to what the respondents to this document have said which is gratifying.

As a consequence Paterson has announced that instead of transferring 15% of payments away from direct support they will now only transfer 12%. Many farmers had been hoping the shift would have been even less than this but even so this move has been generally welcomed by many.

Mr Paterson said, “England’s £15 billion Common Agricultural Policy must deliver real benefits to farming, rural businesses, the countryside and the taxpayer. Today’s decision will see £3.5 billion invested in the environment and rural development schemes over the next seven years. This is a significant change in the way we allocate CAP money and even with a smaller overall CAP budget, the Government will be spending a bigger share of the budget on the environment than before.”

In response to this announcement the Country Land and Business Association president Henry Robinson said: “We are pleased that DEFRA secretary Owen Paterson has listened to the industry and moved 12% from Pillar 1 to Pillar 2 rather than choosing the maximum figure allowable of 15 percent. He has struck a reasonable balance between supporting the environment and rural development and ensuring that farmers in England get a fair deal.”

These sentiments were also echoed by NFU deputy president Meurig Raymond who said: “I am delighted Mr Paterson has decided to keep the rate of modulation below the maximum for the four years until it is reviewed.”

I suspect many farmers will still question why as much as 12% of “their” payments are to be siphoned away from money that in their minds is rightly theirs but I think if such payments are to continue to receive any degree of public support they need to be seen to be delivering wider public benefit than simply income support for farmers. So, it appears this is probably a compromise which will not keep everyone happy but at least it shows the government are willing to listen to reasoned argument when it is presented to them.

However, the next big challenge will be for the policy makers to ensure the schemes which will be formulated to deliver the £3.5billion are put in place as soon as possible. The rules will also need to be simple because if my experience of the roll out of similar schemes is anything to go by, there is likely to be a significant pregnant pause before any of this money hits the ground which in my view has been one of the biggest weaknesses of rural development programmes in the past.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

September beginnings

September is an exciting month. Families wring every drop out of the holidays, returning to schools and workplaces with tans still fresh from a mad drive up from some foreign port, the day before term starts. Children commence new academic years with the mixed emotions of catching up with missed friends and the fresh challenges of being another year older and just that little bit more grown up.

In Winchester, our September starts with the Alresford Show. A wonderful agricultural show which allows us to launch September sales and greet clients, old and new. It is lovely that in a business where over 80% of new clients commence their search via the internet, there is still a place for a chat in a field with a glass and a nibble. Each year, we seem to help more and more clients in this way.

Harvests are safely gathered in and the countryside sports stubbled fields in the gentile manner that gentlemen “forget” to shave on a Saturday yet get away with it with a smart shirt. There is a wonderful market at this time of year, whether it is an Indian summer or an early autumn. Buyers busy themselves, as does the rest of nature – hoping to have everything buttoned down before the winter. Salmon race up chalk streams towards their redds, squirrels bury acorns in lawns that are never to be found, gamekeepers prepare for early season partridge and agents prepare to launch post summer sales.

Seasonality has largely been lost in the housing market as a continued shortage of prime property has eroded the traditional “closed seasons” of the school summer holidays. Whilst it is true that many fathers will spend more time away with their families, this does not replace the desire to find the right property. Conversations around holiday supper tables are no less property orientated than weekend dinner parties in town or country. We have experienced consistent markets throughout the year in this respect. Yet the sea change in buying activity is as arbitrary and unpredictable as the seasons themselves. We have sold houses in April heat waves and August monsoons. A remarkable result in the last round of snow, earlier in the year, was a 17% premium achieved for perhaps the most neglected property we have sold.

Continued historically low interest rates have given way to some very cheap mortgage deals. It is essentially cheaper to buy than rent. Stock markets are within pre credit crunch ranges and sovereign debt has arguably been a feature of western economies since they came off the gold standard. It is the differential that is important, what you sell for is only important in relation to what you pay for the next property. In this market, there has arguably never been a better time to trade up.

A 15% premium was achieved in the recent sale of a village house; following 38 viewings, another recently achieved a 12.2% premium after 42 viewings and 23 offers generated over 10 days of marketing. A current sale of a house in Winchester launched last Thursday has generated 44 viewings, 3 offers and 12 notes of interest so far. The market is of short of good properties; therefore it is a sellers market, with great opportunities for our clients to achieve some impressive results.

I can only look forward to the unfolding sales season the onset of autumn with leaves turning to shades that make the whole countryside appear on fire and all that this lovely time of year has to bring. I have packed away my summer marketing skills set, along with my trout rod. My wellingtons and shooting coat are resident in my car. I have a diary full of property appointments and shoot dates. I am excited by all this new season has in store!

Matthew Hallett
Partner
Head of Residential Sales, Winchester