Property Investment – easy really?

A few years ago, I was asked if I was interested in investing in a property hotspot – Bulgaria. Friends had been skiing in Bansko and it seemed to be the next big thing. Some websites make it sound great.

Sofia, Bulgaria courtesy of Boby Dimitrov

I declined for a number of reasons. First, it is a long way to go and check up on it. Second, the investment is not in a currency I have any control of. Thirdly, I was slightly worried about the political arena. Finally, that I didn’t speak the language or understand fully their legal system.

It seems today that the Mail on Sunday has picked up a story about some unfortunate Britons who have got themselves caught up in a dispute over their investments. They have parted with cash, but are effectively locked out of their own developments. Apparently 70 families have paid more than £6million for apartments two years ago but have still not yet been able to gain access.

I have every sympathy with these investors, this is usually hard earned cash involved and losing £200,000 (as one investor has) is sickening.

I will be at MIPIM in two weeks time – selling Nottingham to the world market. I weas reflecting this morning on what we have to offer. I accept that the headline story about Bulgaria might just be one bad apple; we too have our fair share (see this story in the very same newspaper about Grant Bovey’s proposed bankruptcy). Overseas investors will have to consider the geographical location of their investments. But in general terms I think the UK has a much safer offer for investors in property.

Our market, whilst not perfect, is relatively transparent. Our economy is having difficulties, but we will come through this recession – as we have done before. Our political leaders may leave something to desire, but I am not sure we have widespread corruption. If I have doubts about the politics, I have more faith in our legal system – especially in property.

In Bulgaria, the flats concerned have been ‘sold’ to a company called Zekom. When British investors complained about being denied entry to their apartments, Zecom wrote to them: ‘All issues are to be resolved under Bulgarian law. This means only one thing – God Help You.’

I am glad I didn’t fall for the hype – easy in hindsight! I wouldn’t fancy my chances in a Bulgarian Court.

I can go to MIPIM to sell Nottingham with a clear conscience.

Energy – the great rip off?

You might have seen the evening news this week which highlighted the misery of energy consumers in the midst of the coldest winter for 30 years.

the wholesale price and retail price of energy

It seems that our energy companies are enjoying something of a profit boom as we turn up the heat.

The problem here has been highlighted by OFGEM in a report issued this week. The graph extract shows the issue. Essentially wholesale prices and costs have fallen in the last year – but the retail price has remained flat. Thus, the margin (profit) just goes up.

The problem here is that these energy companies are generally owned by shareholders.

As British Gas say on their Investor Relations page, “British Gas is part of Centrica Plc and we share our parent company’s vision to be a leading supplier of energy and related services in our chosen markets, in order to provide maximum value to our shareholders.” The clue is in the maximum value to shareholders – no sign of a customer in sight! Their obligation is to the shareholders.

OFGEM are supposed to be the watchdog – but are being criticised for their lack of action. Ed Milliband has joined in the fray suggesting, “We need to see all suppliers passing on the full benefits of lower wholesale prices. Householders facing high winter fuel bills deserve to see the benefits as soon as possible.”

This is difficult to see when the shareholders must come first?

You might know from my CV that I worked for a couple of years at Savills. I remember a discussion one evening (when I was on a team building course learning to make machines to throw eggs) when a question was asked of a main board Director, viz. – “who is my duty to – a client or the shareholders”… It’s not one he could answer. Under Company law the answer was the shareholders. Under the RICS rules – the client.

So we shouldn’t be surprise that the energy companies are capitalising on the margin – it’s their duty!

CRC – just the start?

The Government have a target to reduce greenhouse gas emissions – 80% by 2050. The Carbon Reduction Commitment is the stick and carrot.

Large and small buildings to be caught by the CRC?

The new regulations are expected to start in April 2010 and apply to around 4,000 UK businesses who use 6,000 mega watts of electricity – or crudely who spend £500,000 or more on electricity each year. Also, anyone with a half hourly meter fitted since 2008 will be caught.

Organisations caught may have to measure their carbon footprint – and publish it. There may be a league table. They will also have to produce reports showing how they intend reducing their footprint.

But the big stick comes in two parts – firstly if you don’t play by the rules the Environment Agency will have the power to issue fines. And then you may have to buy carbon credits to cover emissions. The charge is currently estimated at around £12 per tonne of CO2. The scheme will be known as cap and trade – savings you make will be rewarded with some cash-back. Mid table folks will get their cash back – those at the bottom will be funding prizes for those at the top!

Ed Milliband, Minister for Energy & Climate Change, issued a statement last month suggesting that, despite the downturn in the economy the targets are to remain, suggesting,

“Government will not rely on the reduction in emissions brought about by the economic downturn to meet its climate targets. To reinforce this, any over-achievement in the first carbon budget due to the recession will not be carried forward to allow for higher emissions in the future. The recession will not deflect the Government’s efforts to cut emissions and move to a low carbon economy. We will not let up on the fight against climate change, instead we must redouble our efforts at home and internationally so the UK emerges from the global downturn building on the opportunities and benefits a low carbon future will bring.”

Despite this high-profile soundbite, I am not sure that the all of the large users have fully grasped the requirements. There is even more confusion over the CRC than there was with Energy Performance Certificates (EPCs) which have been in place for over a year now and still aren’t fully understood!

But perhaps there is an inevitability here? It surely won’t be long before the threshold is lowered to include SME’s? And they definitely aren’t ready!


On Radio 4 at lunchtime today (In Costing The Earth – Greening Fido) it was suggested that the carbon footprint of a large dog in the UK is greater than a 4×4. I had blogged about pets before. I am sure I heard the man on the Radio suggest we should eat our dogs? No thanks. And then he said if you have a dog then you should go vegetarian if the dog eats meat. This truly is the tail wagging the dog!

Housing – a market on the up?

There have been some really mixed messages this week. I have spoken to two Architects about their workload and the general state of the market. Both indicated that the residential sector of their work had increased in recent weeks.

My charity Abel Collins contributed 4 houses to the 2009 total!

This is against the backdrop that the number of new house builds in England was at its lowest level since 1946 during 2009, according to the latest figures from the Department of Communities and Local Government (CLG).

Around 118,000 new homes were built in 2009, which is 17% lower than the number built in 2008. And this is some way off the Governments target to build 240,000 homes each year until 2016 – to satisfy the anticipated number of households.

Although there does seem to be an increase in demand (which may be better described as ‘interest’) I am not convinced that developers are falling over themselves to buy into land.

In fact my conversation with a London based Architect revealed an interesting change in how sales are being achieved. As an agent acting for a vendor of land it was our aim to try to reduce the number of affordable houses on a plot of land – as they had a negative impact on the value (in one case where I was involved the cost of providing the affordable housing was £5m – the resulting residual land value was only £7m). The ‘norm’ for provision depends on the Authority but is frequently cited as 30%. In London, according to the Architect I spoke to, on some of the schemes, 60% is being voluntarily offered as this is the only cash available. It looks as though we might be moving back to building Council Houses!

Yesterday Housing Minister John Healey on the announced a boost to housebuilding in England, confirming nearly £500million funding to build around 8,000 affordable homes across the country. He suggests that this takes total Government funding for housebuilding to £3.5 billion since June.

You can see the scale of the problem – the target is 240,000, we built 118,000 and the Government are going to ‘kick-start’ another 8,000 – so had that number been delivered last year we would still be only around half of the requirement…

As part of my blog earlier this week I did express my concern about our kids getting on the housing ladder. Maybe the affordable housing route is going to be the only way. And that means private renting (possibly through a Social Landlord) or through a shared ownership scheme.

Fox or Elephant – internet abilities by animal type?

There is a great TV programme (The Virtual Revolution) currently on the BBC about the impact of the world wide web. It seems incredible that the web is only 20 years old! It is obvious that there has been an information revolution in culture, politics and business as a result of the web. But the programme questions what the impact is on human psychology.

The new me - a web-fox...

Social networks are changing the face of friendship. The ability to connect effectively with the entire world would have been at one time a dream; but the web now makes this a reality. But there is a suggestion that our brains can actually only have a social relationship with a limited number of people. It is known as Dunbar’s number – after studies by Robin Dunbar – an anthropologist. The number is 150. Actually the average facebook user has less than this number of connections…

The web is also changing methods of learning as Generation Y start to move through the school system. It is suggested the children of today today will be more intelligent than we are – partly due to their ability to collaborate and grab information.

There is a test you can take on line to establish the sort of web user you are – there are eight types. I took the test and it seems I am a web-fox.

The BBC tell me I am:

Fast-moving – Web Foxes like you are great at finding information quickly, just as real-world foxes are always ready to pounce on an opportunity.

Sociable – Foxes are highly social animals, maintaining complex relationships with the other members of their social group. When you browse the web you are also a social creature, often using social networks, or other sites whose content is created by its users, as sources of information.

Adaptable – Web Foxes are highly adaptable multitaskers, able to do several things at the same time – just like real-world foxes who can rapidly change their behaviour to suit their environments.

It is interesting how much our lives are dominated by the web – and how we are adapting. I couldn’t help but wonder what the next 20 years will bring?

By Tim Garratt Posted in Business Tagged Dunbar's number, Generation Y, Virtual Revolution, Web fox, www

Cars and compromises?

Most people who know me realise that my current car is quite important to me. It is my ‘mid-life’ crisis car and goes fast and drinks petrol at an astonishing rate. Last week the £78 petrol bill was consumed in just 168 miles. Short journeys might be fast – but they are expensive. This ignores the tax – which is £604 per month as a benefit in kind.

Nissan GTR - dream car, nightmare tax

I have also ignored the green credentials of the car – which are around zero. Or just below.

Sadly the car is reaching the end of its (leased) life and I need to contemplate a replacement. This is not easy!

I am very lucky in that I can choose pretty much any car within reason.

Performance is important – but super-cars tend to have very high CO2 emissions and thus attract lots of tax for The Treasury. Low carbon emission cars tend to have performance times measured in minutes not seconds! Maybe except the Tesla – but you need a second mortgage for that.

Yesterday I started looking around. I visited a number of dealerships.

I carry some prejudices – good and bad. Nottingham Audi have been superb over the last three years – the staff are friendly and helpful. Nottingham BMW (same ownership) were appalling during the ownership of my last car. Mercedes I similarly struggle with – the level of arrogance in the main dealership is palpable – my wife has an A Class and we now have it serviced privately by the excellent MBNottingham.

Image is quite important in my business but the Jaguar leaves me feeling I need a pipe and smoking jacket – maybe this is unfair. But a Porsche definitely places you in a certain category – especially as the golf clubs need to occupy the front seat!

Which leaves a limited number of cars in reality. We found ourselves at Lexus. I had a Lexus IS200 sport back in 1999 – and loved it. I think I might surprise all of my colleagues (and some of my family) by actually looking at a Hybrid – but the RX450h does offer quite a lot. The level of luxury is high. But the emissions are low resulting in a tax bill monthly of around £260 – a massive £340 saving on what I pay now! But if I am honest the real attractions to this car are the ‘toys’ – Mark Levinson sound system, keyless entry, air suspension and very cool lighting….

And the compromise? Performance. Audi 0-60 = 4.6 secs; Lexus 7.8 secs. So, I will have to find an extra 3 seconds from somewhere!

I don’t have to make the decision immediately – but it looks like I may become a reluctant tree-hugger yet. Or will I?

Business Rate Supplements – another stealth tax?

A new Act of Parliament has slipped onto the Stature Book in recent weeks.

Trolley-car - not at all like the trams we have

The Business Rate Supplements Act 2009 gives county councils, unitary authorities and the GLA a discretionary power to levy a supplement on the national business rate.

Levying authorities will be able to retain the revenue raised from the supplement and use it to invest in additional projects aimed at promoting the economic development of their local area.

This particular tax affects Nottingham as it effectively gives the Council the right to impose the Workplace Parking Levy – which is not exactly popular. The Nottingham and Derby Chamber of Commerce have been running a campaign against it for 10 years! The
tax will apply to businesses in the Nottingham are who have more than 10 parking spaces. It is estimated that only 15% of businesses will pay. It is expected to be in place by April 2012 and cost around £1 per day initially.

Already there are moves afoot to avoid the charge. Boots – with their massive base in Beeston have vowed to move their spaces outside the City boundary. The company’s headquarters straddle both city and county boundaries. There are around 4,500 parking spaces on-site, 3,000 of which are in the city boundary, and 1,500 beyond it. At £250 per space per year the burden is £750,000 pa. By 2015 the charge could be £1.5m. Even for a large company this is ‘bottom line’ bad news!

I accept that we need to resolve transport issues for the future – we do have to try to reduce our reliance on the motor car. My firm have just completed a travel survey for the City Council. The results were not surprising. All of our staff rely 100% on the motor car to get to work. Part of the issue we face is that we spend a lot of time out of the office (surveyors tend not to be chained to a desk). But more importantly, public transport links to NG2 are not exactly convenient – with most people needing to take 2 buses. The tram would help as the next phase runs to NG2 – provided you live somewhere on the line already (none of our staff do).

On the other hand – now is not the time to place more tax burden on business. It’s not exactly easy running a business in the current financial climate. Tax is an easy solution – but not necessarily the right one. Public transport still has some way to go as I discovered on my second tram trip last week. In order for people to embrace it you have to make it easy, convenient, affordable, clean and comfortable. The tram may offer some of these features – but it certainly doesn’t offer them all!

So even with the taxation of business to fund the tram will it change our travel behaviour? Only time will tell….

MIPIM 2010 – preparations continue

With just over three weeks to go before the Le Marche International des Professionnels de l’ Immobilier (MIPIM) final preparations are underway. Investor numbers are reported to be up.

Plimouth plantation nr. Boston - an idea for the Castle? grounds?

Nottingham City Council will be at the show – promoting the City on the world stage. In fact the leader of the Councillor is going very green this year – he’s cycling there! You can sponsor him and Nigel Turpin here. It’s for a great cause – he is raising money for Maggie’s locally.

It looks like there will also be some publicity around Robin Hood – both in terms of the film (due for release on May 14th in the UK) but also some information about the work of the Sheriff’s Commission. I have been on the advsory board of the Commission for the last seven months or so. Some of the key timefames and ideas can be found here. There are some great further Ideas emerging – which I might be presenting in Cannes. I will share them on the blog.

I saw the Sheriff in the week – it is clear that he remains really enthusiastic about how Nottingham capitalise on the Robin Hood brand. We still have some way to go in bringing about a world class attraction to the City – but I remain convinced that it can be done. The World Cup in 2018 might be a driver – it’s not actually that far away when you consider what we need to do. In a nutshell we need an Investor. Public Finances in the next few years are going to be restricted.

One of the things that will happen is Robin Hood month in May (to coincide with the film). Armour making, Jousting and Archery are planned for the Castle. But we are fortunate in that Universal Studios have been kind enough to loan us props from the film – it is hoped that these will be on show! The Broadway Cinema is having a season of films around Robin Hood. Then there is the excellent Castle Rock brewery which is brewing a special Robin Hood Ale…

At last, Nottingham is beginning to realise the value of Robin Hood as a brand for the city. For too many years we have been reticent about his importance.

I am really enthusiastic about what we can do with Robin Hood. He doesn’t run an airport near Doncaster – he belongs to Nottingham. Or as John Paul Davis said “Robin Hood and Nottingham go together like peaches and cream”. I rest my case.

Boom and bust – again?

They say history repeats itself… Inevitably?

Watch my lips- no more boom and bust - as your old man would say...

Should we return to 1997 and the CBI conference that year we would hear Gordon Brown set out the wise words,

“The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management.”

I wonder where the bedrock is now. Perhaps under the massive debt mountain we have? For an explanation of the numbers see my blog post here.

And at the 1999 conference of his own party, Brown suggested:

“…it is because we rejected not just the Tory policy but the flawed Tory values behind it – their short-termist, take-what-you-can, selfish irresponsibility – and it is because we put in their place Labour values of economic responsibility, planning for the long term, building stability from solid foundations – that we now in our country have mortgage rates around their lowest levels for twenty years, inflation at its lowest level in over thirty years, long term interest rates at their lowest levels in nearly 40 years”

Selfish irresponsibility, planning for the long-term, building stability?

Did Labour not notice the booming house (and property prices generally) in 2006? Did it not occur to them that the market was overheated?

The ‘boom and bust’ speech will be the legacy of Brown – just like the 1988 ‘watch my lips no more taxes‘ speech of George Bush Snr. Within four years he broke the promise – and lost the election to Clinton. Brown seems to have forgotten what he said – it was quite some time ago.

The reality is that the property market has always been cyclical – and I venture to say, always will be. What we need to do is try to limit the gap between the peaks and troughs. It has also always struck me that people move house (other than for relocation purposes) and in general terms end up ‘buying’ a bigger mortgage. This is in addition to the extra bedroom!

It does concern me that the first rung on the housing ladder is so high. Our kids will find it difficult to gain a foothold – unless they have a legacy from parents. Average house prices are up again – it stands at £170,000. The problem there is that we parents are living longer. We also have some serious issues concerning our pensions. When our kids leave work I doubt there will be a state pension. In fact, when I retire I’m not relying on it!

And all of this on the back of a report this week that there has been renewed interest in the Buy to Let market. I didn’t think the last one had finished crashing yet!

As I said last week, we really do need to have a reality check. And we need a bucketful of salt ready for the tirade of sound-bites from Politicians – especially in the run up to the election.

It is said that Politicians are like nappies – you should change them often and for the same reasons…

By Tim Garratt Posted in Business, Grumpy Old Man! Tagged boom and bust, Buy to let, George Bush, Gordon Brown, taxes

Mr Average Surveyor?

There was some interesting research completed this week buy the property industry Bible – The Estates Gazette. The annual salary survey has been completed…

Against the back-drop of a falling market and a pretty difficult and challenging agency market this was always going to be an interesting report!

So Mr Average Surveyor:

Earns £48,721 pa
* Expects his salary to increase by 1.97% (better than last years cut of 4.8%)
* Is 36.5 years old
* Has been employed for just over 11 years
* Received a bonus of £5,884
* Earns fees of £150,000 for his firm
* Lives in London, has Blackberry, uses but not
* His firm have 1,400 employees
* He is optimistic about the future

There is always a danger of statistics, statistics and bloody lies? I think there might also be a tendency for people to oversell themselves a little.

But I cannot help but think that this result is completely London centric. It must have been completed by a number of surveyors working for the bigger national firms – especially if their average employee number is 1,400!

I think that there is some optimism returning; but (and I hope I am wrong) we could be in for a difficult year.

Banks are not lending freely – even if they say they are. We have an Election on the horizon. Public Sector spending is out of control and will need to be curtailed. Inflation is up – 3.5% in January. Interest rates are at an all time low – but the smart money is on it being at 5% by 2012.

Mr Average Surveyor seems rather unfamiliar in my home town of Nottingham! I wish he wasn’t…