Renewed activity in Suffolk’s £1m+ market

As residential sales agents, we are always relieved to get back to our desks in January knowing that December is behind us.  That being said, whilst December is a quiet month for agreeing sales, it is by no means inactive when it comes to the near-hysteria of meeting exchange and completion deadlines with almost everyone wanting to be settled in by Christmas!

Spring used to be the traditional peak-time for our market but this pattern has changed over the past five years:  we now have to be fully geared-up for the immediacy of very keen buyer demand through January and February – and this year is no exception.  In fact, the first two weeks of 2016 have been exceptional.

Whilst last year saw the strongest performances and demand for houses up to £800,000, we are now experiencing high demand in the early £1,000,000s and agreed four such sales in the second week of January.  The reason for this is Stamp Duty Land Tax (SDLT).  In last December’s Autumn Statement, George Osborne announced that buyers of additional residential properties - above and beyond their principal home - would have to pay 3 per cent above the current stamp duty rates from 1 April this year.  This has, in particular, really made the London second-home buyers jump off the fence.  

They know they have to make quick decisions on which house to buy if they are to exchange and complete by 31 March 2016.  Solicitors are going to be kept busy!  This is temporary good news in so much as this price bracket was the weaker sector last year.  Post 1 April may well be another matter…

It’s interesting to see that our current London buyers are clearly successful business people – for once they are not, in our experience, stockbrokers or bankers.  The volatility of international stock markets appears to be keeping ‘The City’ buyers well and truly in London for the time being.

As yet, the facts on the new SDLT aren’t set in stone, however. The Treasury is consulting on the SDLT changes until 1 February 2016 and everyone can have their say if they choose to hop onto the relevant HM Treasury website and relay their points of view.

But this is just one sector of the market.  Looking right across the price thresholds, we predict a confident year ahead for our region and this is an opinion shared with most property experts.  Forecasts for capital value growth through 2016 in East Anglia range from around 4 to 8 per cent.  Our Suffolk, Cambridge and Northampton offices are going to be busy…

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

Will there be an increase in land supply on the market during 2016?

Pressure from banks reviewing farm incomes could contribute to an anticipated increase in land supply on the market during 2016.

Bank reviews could encourage sales of off-lying parcels of land and motivate the sale of whole farms as pressure on commodity prices drives farmers from the industry. Other sellers may be tempted to take their profits from land bought before 2006 after which land prices started to rocket as the global recession set in.

While agricultural land values increased by 2.5 per cent in the first nine months of last year, 2015 witnessed the lowest rate of increase since 2009, indicating that now could be the time for owners to take profits and recycle their capital. 

Investment buyers driven by opportunity rather than location are still very active, creating pockets of activity that can see vastly different values in land sales only 10 miles apart.

Investors are not necessarily bad news for local farmers. While they add competition, which is great news for all those looking to sell, they invariably do not farm the land themselves and so create opportunities for innovative contractors or new farm business tenancies. 

During 2015 my firm, Carter Jonas dealt with the sale of 32,900 acres across the UK, both on and off the open market, with many of those sales made possible by our management teams negotiating deals to obtain vacant possession of farms prior to sale.

It seems the most active buyers across the country are either investors looking to avoid Inheritance Tax through Agricultural Property or Business Property Relief or those trying to avoid Capital Gains Tax following the sale of development land using Rollover Relief.  Farming purchasers are less visible and tend to focus on the 50 to 200 acre blocks in close proximity to the “home farm”.

Those seeking to take advantage of Rollover Relief have a finite three-year window to invest funds into land, which may explain why so many successful deals have been concluded in very short timescales as the three-year deadline approaches.

As the economic recovery has taken hold and government planning policy is encouraging house building, the development land market has kick-started, increasing the volume of roll-over receipts actively seeking a home in agricultural land. This source of demand is forecast to account for a growing proportion of the land buyer profile over the next few years, taking up the slack caused by the increasingly restrained purchasing activity of farming buyers. 

Across the country we have seen blocks of farmland of more than 1,000 acres sell strongly – farms and estates with shooting interest also sell well. Of particular importance is land of all descriptions outside towns and cities where development is taking place and therefore where there is roll-over money looking for a home.

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

Goodbye and good riddance

Goodbye and good riddance: 2015 has been a year to forget for most farmers.  The bright side has probably been the weather helping crops grow well and producing record harvests for many, which was just as well because crop prices tumbled.  

To put this in to context, the value of feed wheat has fallen from around £130/tonne a year ago to around £105/t just before Christmas. This is a drop of nearly 20 per cent and with costs of production running at around £130/t it is not difficult to do the maths. 

In the livestock sector, sheep farmers had a particularly difficult year as lamb prices fell away sharply in the spring and summer with many lambs being sold at around £60/head compared to  £80-£90/head the year before.  This has led to very challenging times which still remain with lamb prices now about 50p per kg lower than a year ago.

Beef prices became more stable in 2015 but that followed big price falls in 2014 and so some respite was welcome. But even so prices have eased with finished cattle prices currently down around 15p/kg compared to this time last year.

However, the headline grabbing news has been the sustained and dramatic fall in milk price which is keeping many dairy farmers under pressure.  In this area we are luckier than some as very few of our farmers are signed up with the worst hit milk purchasers such as First Milk where their producers are receiving not much more than 17p/litre.  

Even so, many of our local farmers are receiving only around 22 or 23p/litre which is well below the average cost of production, resulting in widespread financial problems.

But, unlike other agricultural sectors where the value of the product being produced is similar for most farmers in that sector, the price dairy farmers are paid for their milk varies widely, being dependent on the milk supply contract any particular farmer has been able to secure.  As a result there are dairy farmers on supermarket aligned contracts who are still receiving around 30p/litre which is almost twice as much as those on the worst contracts.  

This means that the fortunes of two seemingly similar neighbouring dairy farmers can vary widely but in reality the majority are not on the best contracts and are suffering badly.  Unfortunately there is little sign that prices will improve dramatically in the short to medium term and so the gloomy theme of 2015 seems likely to continue in 2016.  

The only ray of sunshine is the fall in other costs of production such as feed and fuel bills, but in many ways these simply reflect the worldwide fall in commodity prices across the board which are the main reason farmers around the world are feeling the pinch.

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

Farming debt has risen

It is sobering to learn that farming debt in the UK has risen annually by approximately £1bn for the past five years and in the 12 months to September 2015 it rose by a staggering £1.45bn - bringing total debt to £17.5bn.

This is not all doom and gloom because some of this debt has increased because many farmers have made good profits since 2007 and used some of these profits for much needed investment in fixed equipment and land. However, the tide has certainly turned and in the last 18 months or so additional debt has been taken on to finance losses.

In this context Andersons, the farm business consultants, predict that farm debt is likely to rise between £1 and 2bn by autumn 2016.  Securing these funds will be challenging because banks have become increasingly demanding in their requirements.

But with interest rates still at historically low levels, businesses are currently being cushioned from the worst effects of these rising levels of debt although now US interest rates are increasing, the prediction is that Bank of England rates will follow this upward trend in the next year or 18 months. Rates are not expected to rise dramatically, but now may be a good moment for businesses to consider fixing the interest rate on least some of their long term borrowing.

However, if additional debt is to be taken on, the importance of preparing good business plans, budgets and cashflows cannot be overestimated, particularly if it is predicted that losses will be made in the short term.  

Banks will need to be confident that any farmer wishing to borrow more will have the ability to service that debt. It is no longer sufficient to rely on capital value of land and property as the security.

Farmers who cannot convince the banks that they have a firm grasp of the finances of their own business will struggle to secure further debt. This is the moment when such individuals must be careful not to fall into the grips of unscrupulous lenders who may offer finance but at crippling rates which will often end in tears.  

But for those who can secure debt based on realistic short-term budgets and longer term optimism that commodity prices will rise once again to more sustainable levels, there is reason for hope in 2016 and beyond. 

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

Compass points enterprise zones towards 2016

In the recent round of identification and designation of new Enterprise Zones (EZ) – announced by Chancellor Osborne at the end of the last month -  there are no fewer than 15 locations in Cambridgeshire, Suffolk and Norfolk. One of which, Haverhill Research Park, is claimed by Cambridge but is actually in Suffolk. All of which, to varying degrees, property agents in the patch have substantial interests either directly as an appointed advisor to the development or an occupier seeking premises or, indirectly, in working for the owners or current or potential occupiers on nearby sites, estates or Parks in the pipeline or already established.

The LEPs in this region – the Greater Cambridge Greater Peterborough Enterprise Partnership which delivered the 5 sites which comprise the Cambridge Compass Enterprise Zone area and the New Anglia Local Enterprise Partnership which succeeded in not only making the case for creating 10 new EZs in Suffolk and Norfolk under the Space to Innovate banner, but also in the extension of the current Great Yarmouth & Lowestoft (New Anglia) Enterprise Zone – have done more than a fine job in achieving these zones in the region.

Coming together in partnership with business and other local interests, these LEPs have successfully navigated the labyrinthian corridors of Whitehall to make the regional and local business cases to the national civil servants and government advisors who hold the purse strings when it comes to the creation of EZs and other sources of central funding.  

Anyone who has ever tendered for projects involving public money – whether professionally, many agents have dedicated teams to work in public sector projects and those which have to access public funds, or in a more civic or social role – can have nothing but praise for what the LEPs have pulled off for the eastern region.

But the plaudits shouldn’t stop there. Because while each LEP’s remit and accountability extends to its own area, technically, collectively the emphasis of each of the new EZs in playing to the attributes of each locale forms a chain of EZs which gives a complete picture of our region.

For instance, two new EZ locations in rural north Norfolk will have energy and the low carbon sectors in their sights. Whereas, one in King’s Lynn has agri-tech and food production at its core.  Equally, some of the new EZs in Suffolk play to the strengths of the ports and the A14 in positioning logistics and the supply-chain sectors. 

The Cambridge Compass Enterprise Zones gives 5 former fringe locations a chance to capitalise on the ‘Cambridge effect’ in terms of employment opportunities with 2 – Cambourne Business Park and Northstowe Phase 1 pointing the way forward in co-locating homes and jobs.

These new EZs come in to effect in spring next year (2016) and while I am no archetype Pollyanna, I welcome the way these will help point a way forward for this region which is far from inward looking in having Felixstowe port as the gateway to the rest of the world.

Will Mooney MRICS
Partner
Commercial, Cambridge

Life’s an adventure – and it’s never too late!

One of the best things about an estate agent’s job has got to be all the wonderful houses we get to see throughout the year – in all shapes, sizes and locations.  Added to this, are all the different personalities we come across - I truly believe there is no such thing as an uninteresting person; if you engage with someone for long enough you will always discover something unique and fabulous about them.

Yet some people really stand out from the crowd - they capture your imagination and inspire you.

One such couple, whose house we have recently sold, made a special impression on me.  As estate agents, when we carry out an initial market appraisal, not only are we looking at what the property is worth and how best it should be marketed but we are also developing a bigger picture of our clients - this includes discovering their reasons for moving.

This particular couple had both just retired from prestigious careers and could easily have followed the more usual and very comfortable route of looking forward to grandchildren, spending time on the golf course and more regular holidays.  

But this was not for them.

Having spent so much time on their careers and bringing up their children, they, literally, had no plan whatsoever – or, indeed, perhaps the best plan ever – to sell up and go on a gap year!  Not having taken a gap year prior to their careers it’s the perfect time to catch up.  They can now discover where life is going to entice them.

The down-sizing move (or right-sizing as it is now called) following retirement is often the most difficult move anyone makes in a lifetime.

There is so much to consider, especially if moving from a much-loved family home to something smaller and more practical.

Many people have thoughts beyond retirement of life going downhill – a potential slow-down and living life, vicariously, through children and grandchildren.  But it doesn’t have to be so…

What excited me most about this amazing couple was that a slow-down was not on the agenda - the adventure was just beginning.  They were going to pack up their dogs and some luggage and hop in their car to France and see where life took them for the year ahead.

Without the constraints of responsibilities they can, gradually, take stock of their lives and allow the decision-making process to happen organically.  On a practical note their children are wholly supportive, plus a very small cottage has been purchased in a Suffolk village to ensure they don’t lose their foothold in the UK property market.

It is really refreshing to think that moving house doesn’t always have to dovetail between selling one house with the certainty of buying another perfect replacement. 

What a great idea to take a breather and to remember that there is no set path, just follow your heart.  And, most importantly, it is never too late.

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

Christmas has come early

Christmas has come early for tens of thousands of farmers as the Rural Payments Agency has surpassed the expectations of many industry commentators by starting to make Basic Payment Scheme payments on time.

I was relieved and surprised to receive notification from the RPA at the end of November that a number of clients were to receive their Basic Payment Scheme payments on December 1.  This was the first day of the payment window and the RPA must be congratulated on getting at least some of them out so promptly.

The RPA has confirmed that more than 33,000 farmers in England were paid their 2015 BPS claim on December 1 and they have committed to paying at least 44,000 claimants (50 per cent of the total) by the end of December. This is in addition to having made £21 million of EU dairy support payments to almost 11,000 dairy farmers in England, Scotland, Wales and Northern Ireland as I reported previously.

NFU vice-president Guy Smith said: “When the RPA starts talking about a percentage, we want to see value as well as volume going out. We do not want to see one million £10 cheques. We want to see a good cross-section of payment claims going out.

“A significant amount of money has gone out – and we have to congratulate the RPA for that. But the fact they have only paid just over one-third of applicants increases the anxiety among the have-nots.”

It is clear to me from those payments I am aware of that those which have been made are for small and relatively simple claims. So there is concern that some of the larger, more complex claims may remain unpaid for some time to come.  This worry has been raised with the RPA by industry leaders and as a result the RPA has written to all complex cases, which they do not expect to pay by the end of January. 

The official payment window runs from December 1, 2015 to June 30, 2016, so some farmers could still be in for a long wait and I urge banks to help with the cash flow crisis that will be caused by these delays.

But, at this stage all we can hope is that the RPA continues to surprise us with good news and even the most complex of claims will be made early in the New Year.

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