Recession – what recession?

So we are back in recession and can confirm the ‘double-dip’ – well technically we can anyway. But should we really give this apparently depressing news anything more than a passing grimace as we get on with our job. If you look back over the last few months, GDP has been up a bit and down a bit. There is no doubt that we face some major challenges, not least where some of the property debt might come from to replace that which has to be renegotiated over the next 2-3 years, but the majority of business are getting a bit fed up with being in recession. They are keeping their heads down and just getting on with life.

The British Chamber of Commerce summed up the position succinctly in its press release which I quote below.

“The latest ONS data shows a fall in GDP of 0.2% in the first quarter of 2012, pushing the economy into technical recession. The figure is disappointing, and paints an unduly pessimistic picture of the state of the economy. Many commentators will question the accuracy of the data, particularly as it is based on only 40% of the information used for these estimates. As well as large falls in the construction sector, the estimate by the ONS that service sector output rose by only 0.1% on the quarter will be seen as too low by most analysts.

“Business surveys, including the BCC’s Quarterly Economic Survey, have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends in the economy. We think it is likely that the preliminary estimate will be revised upwards when more information is available. For the time being, the main priority is to minimise any possible damage to business confidence. These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism.

“But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth. That means reducing regulation, encouraging exports and improving infrastructure. While the government must persevere with plans to reduce the deficit despite these figures, it must introduce more measures to empower businesses to drive recovery.”

It would be a tragedy if we allowed the recent news to dent the vital confidence which allows business to invest in the future, because it is that investment which will drive the economy into more sustained growth.

Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

MIPIM - glamorous surroundings, serious intent

If you are a reader of a certain popular Sunday paper, you will have learned that MIPIM, the international property conference which takes place in Cannes each March, is a place where local authority councillors go to swill champagne at the ratepayers expense and most men spend the rest of the time, when they are not swilling champagne, in the arms of the many prostitutes that allegedly flock to Cannes for the MIPIM week. I must admit that the article made me feel a bit inadequate. I certainly have had the occasional glass of champagne at MIPIM and, even more occasionally, have had a glass or two with local authority councillors, although it is normally beer, but, in all the 13 times that I have attended MIPIM, I have never once knowingly talked to a prostitute. I think I saw one once – well two actually – when two statuesque and very attractive blondes with a heavily muscled minder appeared to be working the foyer at the Carlton Hotel, but even now I am not sure.

It is true that MIPIM takes place in wonderful surroundings – glamorous villas, luxury yachts and 5 star hotels – with delicious food and drink, but the vast majority of attendees go there to work very hard. The rather pathetic article in the Sunday Express is an easy one for a lazy journalist to write but I remember a few years ago, sitting beside a journalist from the Yorkshire Post at a dinner hosted by Bradford Council. I asked him what he made of MIPIM. “I came here to write an article about local councillors spending the ratepayers money on a champagne junket in the South of France” he said. “But, having seen how hard they have worked, the real contacts they have made, and what they have achieved for their area, that is not the article I am going to write at all”. It is a brave decision for a local authority to attend MIPIM, particularly when times are hard and Government cuts are affecting every authority in the land but it is a hugely worthwhile investment in the future of their area and an unrivalled chance to engage directly with investors, and those who direct investment, to ensure that opportunities for growth – and jobs, and housing – are given the best possible chance of success.

So what was the mood of those of us who were concentrating on the UK property market for 2012 and beyond? The overriding impression is that there is a huge amount of equity available to invest in opportunities, but very few opportunities which match the risk criteria of those investors. It is rare for an agent to be so popular but with the many developers desperately seeking opportunities to invest, anyone who might be able to source those opportunities was feted. The real challenge , and possibly therefore the opportunity, comes on the debt side. In the heady days of 2005 – 2007, a huge amount of debt was written on property transactions normally on a 5 – 7 year term. In the next 2-3 years, some £135bn of this debt is coming up to be refinanced, and many of the traditional debt lenders are out of the market. That, coupled with the more stringent requirements to be imposed on the banks by Basel III, means that banks can no longer ‘pretend and extend’ so we are beginning to see the first signs of new debt providers – the insurance companies, equity funds and the like – coming to the market. So the second most popular people at MIPIM seemed to be those who have access to that debt. The by product of all this of course is that there is a greater likelihood that much of the property which has been locked away under the control of the banks, because low interest rates and outstanding debt exceeding value have made bringing property to the market very unattractive, might actually now start coming to the market – and whilst this potential flood of properties might have a significant downward effect on property values in the short term, it is a real time of opportunity for the well funded developer that has the skill and innovation to bring some of these neglected assets back to life. It is going to be a painful time for some of those banks though, because they are going to have to take some fairly serious further writedowns before they come out the other side.


Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

Don't build on my back yard

So we are back in recession and can confirm the ‘double-dip’ – well technically we can anyway. But should we really give this apparently depressing news anything more than a passing grimace as we get on with our job. If you look back over the last few months, GDP has been up a bit and down a bit. There is no doubt that we face some major challenges, not least where some of the property debt might come from to replace that which has to be renegotiated over the next 2-3 years, but the majority of business are getting a bit fed up with being in recession. They are keeping their heads down and just getting on with life.

The British Chamber of Commerce summed up the position succinctly in its press release which I quote below.

“The latest ONS data shows a fall in GDP of 0.2% in the first quarter of 2012, pushing the economy into technical recession. The figure is disappointing, and paints an unduly pessimistic picture of the state of the economy. Many commentators will question the accuracy of the data, particularly as it is based on only 40% of the information used for these estimates. As well as large falls in the construction sector, the estimate by the ONS that service sector output rose by only 0.1% on the quarter will be seen as too low by most analysts.

“Business surveys, including the BCC’s Quarterly Economic Survey, have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends in the economy. We think it is likely that the preliminary estimate will be revised upwards when more information is available. For the time being, the main priority is to minimise any possible damage to business confidence. These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism.

“But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth. That means reducing regulation, encouraging exports and improving infrastructure. While the government must persevere with plans to reduce the deficit despite these figures, it must introduce more measures to empower businesses to drive recovery.”

It would be a tragedy if we allowed the recent news to dent the vital confidence which allows business to invest in the future, because it is that investment which will drive the economy into more sustained growth.

Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

George Osborne’s Autumn Statement

There is some good news and some bad news for the property industry in George Osborne’s Autumn Statement delivered to the House today. Another £5 billion of infrastructure funding on top of the £1.3 billion already promised, and a possible further £20 billion of funds from UK Pension Funds will certainly provide a boost to the economy not only from the work they generate, but also from the increased accessibility that will result for the regions which benefit. Couple that with the intention to make planning appeals faster and more transparent and we might actually get to see some of these projects starting on the ground. The rural Growth Networks and the already announced Growing Places Fund of £500 million will also help to deliver new much needed housing. Enterprise Zones have worked in the past and should help to stimulate growth but only if businesses are strong enough to take advantage of the opportunities.

Not such good news though is the end of the stamp duty concession for first time buyers. Whilst Osborne is convinced that the concession did not have much effect, it certainly did ease the path for those buyers who were in a position to enter the market and it remains to be seen whether the Government mortgage guarantee scheme to enable buyers of new homes to get a 95% mortgage will be any more effective. And somewhat pie in the sky is the Government’s affirmation that it will support new locally-planned large scale developments ‘which have clear local support’. The abolition of the Regional Spatial Strategies has removed what was a convenient policy for local and national politicians in favour of development to hide behind should vociferous parts of their electorate oppose development. Now they have no option but to listen to those voices – and that coupled with the Coalition’s slavish adherence to the Green Belt, much of which was set out in the 1940’s and ‘50’s and now totally anomalous, is not going to make development any easier.

The Chancellor has a difficult tightrope to walk, to provide what stimulus he can to our struggling economy on the one hand, whilst continuing to reassure our funding partners that we are serious about tackling the deficit. He has probably succeeded in that aim but it is still going to leave us with a challenging 2012 and beyond.

Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk