The European Investment Bank (EIB)

Farmers who are looking to invest in new buildings, machinery, or equipment should be aware that there are currently funds available from the European Investment Bank (EIB) which are aimed at helping investment in small and medium sized enterprises (SMEs).

SMEs are defined as businesses which employ less than 250 staff and so this covers most farmers. The size of the loan can be anything from £25,500 up to about £11m and so this should cover most levels of borrowing.

The funds, which can be accessed via high street banks or organisations such as the Agricultural Mortgage Corporation (AMC) reduce the borrowing rate by about 0.8% for loans of between 2 and 10 years and 0.6% for loans between 11 and 25 years. These discounts are available throughout the lifetime of the loan which on a £100,000 loan over 10 years would save the borrower about £4000 which is not to be sneezed at.

However, it must be understood the funds cannot be used for all types of borrowing and care is needed to identify whether the proposed investment qualifies. For instance the purchase of land or the refinancing of existing debt, which are two common reasons for borrowing money, does not qualify.

The EIB is EU’s long-term lending institution which is owned and financed by the Member States. It was established way back in 1958 under the Treaty of Rome and is there to support the EU’s priority objectives and in this instance funds are available to support investment being made by SMEs.

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

The amount of money being made available by the EIB is limited and it is likely this fund will run out soon. Therefore any farmer who is contemplating making a capital investment which will involve borrowing money is urged to make contact with their local Carter Jonas AMC agent or the author of this blog, James Stephen who will be able to put you in touch with the appropriate member if staff.

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

Not playing the blame game

Imagine a media interview in which a politician, in under eight minutes, managed to not only answer two interviewers’ questions but appeared to be without the yolk of partisanship in clearly setting out how a country could, step-by-step, find its way out of recession through central government policy.

The politician being interviewed came from a Euro-currency country but he bore no bitterness towards his more powerful northern European neighbours, nor grudges toward his southern Euro-counterparts. He was very much not in the blame game.

How refreshing but it’s probably no surprise to anyone who has done business in the politician’s country. It was Mark Rutte, the Minister-President of the Netherlands– equivalent to the UK’s Prime Minister.

He spoke clearly and openly about his country’s growth strategy which seemed remarkably similar to what many people in this region and other UK hotspots targeted for growth have been urging as the way forward.

Rutte’s strategy for the Netherlands is to focus on the innovation, creative and technology industries, aligning the universities with business and vice versa at the earliest possible opportunity.

The Dutch Minister-President was being interviewed in Manchester - another great university city with a science focus through UMIST, its university’s institute of science and technology – where his delegation had been visiting a number of SMEs in the creative and innovation industries, as well as sharing thoughts on transport.

Not by coincidence as these things play out, the previous week, forty business leaders from the Netherlands had been on a fact-finding mission to Cambridge and had met several of our academic, business and civic luminaries including Prof Alan Barrell, Dr Hermann Hauser and the Mayor of Cambridge.

You would think that at such a time of crisis for his country’s currency, that as a political leader, Meneer Rutte would be grandstanding about the need for financial institutional reform, taking a view about the role of the European Central Bank and, as a politician, he surely wasn’t going to resist having a pop at some of his counterparts?

Not a bit of it. In fact he admitted he wasn’t a fan of huge institutional debates.

Instead he coolly and calmly outlined his roadmap for growth which he summarised as getting public finances in order, taking away hurdles for new business, making government smaller and getting the universities involved as quickly as possible in business life to get development from innovation.

The Dutch leader felt that it was important for him to get in to the thick of what was going on and he couldn’t do that from The Hague. He appeared really pleased to be in the thick of it over here and complimented us by saying the UK’s innovative and creative capability were needed - with 50 per cent of our exports going directly in to the Eurozone, he’s got a point.

According to Meneer Rutte, we have much in common with other non-Euro currency countries such as Sweden, Poland and the Baltic states who are all growth oriented as much as his own country – which, after all, is this region’s closest continental neighbour across the North Sea.

This 44-year old politician is just over a year in to a role which has no limit to its term in office and based on the interview, he sounds like a person with whom we’d all like to do business.


Will Mooney MRICS
Partner
Commercial, Cambridge

Investing in the Future of Your Farm

Last week saw the second of two seminars here in the West Country, run by Old Mill accountants based in Shepton Mallet and Carter Jonas, a national property consultancy based locally in Wells and Bath. Both seminars were sponsored by the Agricultural Mortgage Corporation (AMC) and supported locally by the Royal Bath and West of England Society who also hosted the first event at the Showground.The seminars were entitled “Investing in the Future of Your Farm” and both attracted over 100 farmers which only goes to show how eager they were to hear what the speakers had to say, or perhaps the free supper afterwards was also a bit of a draw! But whatever the motivation for attending I don’t think many left disappointed.

Kit Harding, Partner at Carter Jonas opened the meetings with a talk on the market for agricultural land which, unlike the residential property market remains extremely strong, being driven largely by scarcity and increasing farm profitability.

The scarcity factor was brought home particularly starkly by one slide that showed the area of farmland sold annually has fallen steadily since the war and at about 120,000 acres being predicted for 2011, this is little more than 10% of what was sold in the late 1940s. Thus it is no wonder prices have risen, especially in these uncertain times when anyone with cash is looking for a secure investment and farmland seems to fit that description.

Further, farmland makes an attractive investment because it can attract 100% inheritance tax relief which is one of the reasons why farmers when they retire, tend not to sell their land preferring to retain it and let it out. This contributes to the scarcity of supply which is made worse by the very obvious point that “they are not making any more of it”.

Jonathon Day, new regional manager for the AMC in the South West chaired one of the meetings and said there was cautious optimism in the farming industry. He commented, "Commodity prices are the best for a while and it has been a record summer for investment and although CAP reform is on the horizon there is some reason for confidence".

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

All in all it seems the attendees left satisfied, having both food for thought and food for the stomach.

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

Bottoms up in Bath!

The big Christmas lights switch on with John Cleese in Bath last Thursday has signalled the official beginning of the festive period and as we know this is usually followed by the swift hibernation of the UK housing market!

However, in recent years with increasing access to property via web portals and smart-phone web apps the housing market has become far less seasonal and 2011 as a whole looks to be continuing that trend.

The early ‘New Year’ market was particularly buoyant in the southwest region and certainly out-performed the perceived stronger selling seasons of spring and early summer and this has become somewhat of a trend in recent years as quick decisions about property are made following the Christmas and New Year break.

The early autumn market too used to be a popular period for both buyers and sellers but the summer holiday hangover seems to have lasted longer in recent years and that is certainly true of 2011 in the southwest as the market didn’t really start to pick up until early October. We’re now rapidly approaching the end of November and viewing levels are still encouraging even though quality stock is in short supply and the viewing to offer ratio has come down to approximately 1 in 8 for October which was 1 in 49 in September. Activity is such that we have just released two new properties to the market, something that we would not have generally advised in years gone by and after just a few days we have had several viewings on both and an early bid on each.

It is also worthy of note that the greatest activity, particularly since the summer has centred on property below £1m and even more so on those below £500,000 suggesting that should a recovery be forthcoming it will have been supported to a greater extent from the bottom up rather than from the top down! In Bath we are particularly keen on increasing the level of city centre property that we are dealing with but we are now focusing just as much on high quality flats and apartments as we are on fine Georgian town houses due to the greater demand.

I am convinced that with just a few more positive headlines regarding the housing market we will see the return of buyers for the regions prime country houses, although in many cases significant price reviews will be needed as unrealistic pricing has been a fundamental reason for the severe lack of activity and confidence in this sector of the market in recent months.

So the Christmas parties, drinks receptions and general celebrations will have to wait at least for a few more weeks while we still have willing buyers and motivated sellers. We have all learned a great deal from the 2011 market, particularly from the vantage point of our new office here in Bath, the recovery is clearly going to be a slower process than many ‘experts’ predicted back in 2008/9 and old fashioned proactive agency together with realistically priced property will be the key to a successful 2012 and we’re eagerly anticipating a busy and productive New Year.

Patrick Brady
Associate
Residential, Bath

Learning to live with whatever ‘the new normal’ is

I’ve been told recently that ‘being on the brink is the new normal’ and this is how it is going to be for the foreseeable future. There is the temptation to head for the hills but that’s a little difficult for us in the flatlands of eastern England.

Yet in the past month, I’ve read comments by property grandees and gurus which suggest parallel ways in which we can survive and actively thrive in this new normality.

At a strategic, long term investment level, it’s difficult not to agree with those – like Jeremy Newsum of the Grosvenor Estate - who favour a quiet acknowledgement of the fact that while there is a good reason to panic and thereby to join the throng and sell wholesale, it’s probably best not to. We will only add to our own troubles.

The most sage should just sit it out day-to-day and resist the temptation to follow too closely the lead of the markets at such times.

Property, after all, is but a tiny part of something bigger which is happening.

While there’s the feeling that we neither know what that something bigger is, nor do we know how it will play out, it’s better to control what we can than add the to mayhem.

Yes, there are select deals to be done because even a modest return on property is better and safer than other many asset classes.

While the cool advice is to choose to do nothing on one level, there is a level where a more thrusting approach is required. This advice is encouraging us to adopt tactics now to embrace this ‘new normal’ and come to terms, quickly, with the opportunities emerging and on offer to us by this new world order.

This advice talks with confidence about now being a time for new skills, new sectors and, even, new sub-sectors. So while the world is ‘getting more global every day’, it seems the way forward for property advisors is to become more specialised and niche to get in tune with our more fragmented markets.

It is cheering that while property is a dry investment, it’s still considered an investment with a return, nonetheless.

Anyone advising clients with retail and leisure interests will get what is meant by the need for specialist advice in fragmenting sub-sectors.

What we can all agree on is that we’re in a time of price correction when it comes to assets. The hurt we’re taking in property is probably only what we’re due anyway post-2008, if we really stopped to think about it.

As we look around to other business sectors, let us be thankful that if price correction is the worst punishment we’ve got to take and with the addition of working a harder in new ways for our clients in order to advise them better on all things niche, then we’ve got off quite lightly.

If a state of affairs goes on for long enough then it’s normalised - so we’d best get used to it.

While it’s a good time for neophiles, it’s a bad time for haters of business jargon and I am going to add to their groans here by suggesting that, perhaps, the default state of being for the foreseeable future is one of renewal becoming the new normal.

Will Mooney MRICS
Partner
Commercial, Cambridge

Investing in fundamentals

This week’s housing market reports and predictions are as contradictory as they are arbitrary, which is de riguer in an uncertain world.

In times of uncertainty, investments in fundamentals are seen as a safer haven. Concerns over European leaders being able to tame the sovereign-debt crisis have further boosted demand for gold as a safe haven investment. Spot gold prices reached $1,804.10 an ounce, a seven-week high, in yesterday's trading in New York. Farmland prices have almost doubled in the past five years and are somewhere around 5% higher than a year ago. Over the past 10 years agricultural land has grown 204%; which is twice the increase shown in London property prices and notably above the 6% growth experienced by the FTSE 100 during the decade. Even best English shotguns have been targeted by investors with record prices being paid and valuations rising around 3-5% a year.

Residential property, however, which is as fundamental an investment as most of us own, is, it appears not the darling of the press it once was. It is cheaper to buy than to rent. Yet, we seem to have become immune to the charms of historically low mortgage rates and the opportunities as differentials gaps narrow.

Rising commodity and fuel prices have exerted growing pressures on household incomes. But there are waiting lists across some of the quality marques for their latest range of smaller SUVs. A client tells me track side, bookmakers have reported as much as a 20% increase in takings, certainly Ladbrokes’ recent quarterly results showed a 2.5% increase over the same period last year.

The property market in Hampshire is frustrated. We have any number of excellent buyers but a steady flow of fresh properties coming to the market is being hampered by media sentiment and a feeling that perhaps it is better to wait until spring. All of this is quite understandable but our mailing lists are full of purchasers who have see the light of buying in this climate.

November, whilst not a classic time to launch a sale, offers the backdrop of an autumnal landscape and the focus of Christmas. Yet the mild weather and turning shades has given us some wonderful days. Both rivers and the countryside teem with life and entomological hatches are still a valuable food source. Game feeders provide further food for over wintering song birds and skeins of geese can be heard at dusk as they return to the safety of the river from a day’s grazing. The clocks changing gives a welcome sunrise to us early dog walkers and it is not cold enough yet for a winter coat. But as surely as night follows day, winter is close by. If the weather patterns of the past few years are repeated, we may have to wait a long time until spring. Whilst autumn can feel like a prelude to the main event , we must be careful what we wish for. Perhaps the thing that is most missed by those who leave our island for warmer climes, are the seasons. This year, mother nature has excelled herself with the loveliest autumn display. Jack frost, surely cannot be far away.

Matthew Hallett
Partner
Head of Residential Sales, Winchester