Tag Archives: calendar
Property: Is This Just Another Bubble?
Is it time to ditch property just five months after one of the biggest boosts to the sector in decades? By Nick Reeve | Published Sep 02, 2013 The introduction of the government’s Help to Buy scheme in April triggered huge gains for housebuilders and other property-related stocks, which in turn has helped UK small and mid-cap managers – who have the widest selection of such stocks – to record strong 2013 performances. The average performance of the 10 biggest mid-cap focused funds so far this year has easily outstripped the wider IMA UK All Companies sector, according to FE Analytics – 23.4 per cent from mid-cap portfolios compared with 16.6 per cent from the sector. A big part of this outperformance has been exposure to the housing sector, whether through housebuilders or other companies indirectly linked to this area. Star mid-cap managers such as Franklin Templeton’s Paul Spencer and Old Mutual’s Richard Watts have been particularly vocal in their support for the housing sector. It’s easy to see why. Investment Adviser’s research into the top holdings of 10 UK mid-cap funds found that between them they invest in 22 property-related firms. Of these firms, 20 have posted share-price gains of more than 25 per cent in 2013 alone. Examples held by several managers, including both Mr Watts and Mr Spencer, include Ashtead Group, a provider of heavy-duty construction equipment, which has gained 42 per cent so far this year; and kitchen-maker Howden Joinery, which is up 51 per cent. But there are increasing signs that the property recovery may have run its course already, and it may be time for the likes of Mr Spencer and Mr Watts to cash in on their profits. Last month property fund managers from Aberdeen and Henderson told Investment Adviser that the easy money may already have been made from property, with Aberdeen’s Sanjeet Mangat warning investors in her £176.2m Property Share fund not to expect its strong performance track record to be repeated. Ms Mangat’s fund is a member of the Investment Adviser 100 Club of outperforming funds and providers (see page 29). John McClure, manager of the top-performing Unicorn UK Income fund, said in June that he was steering clear of most housebuilders and developers as they were “structurally flawed” and did not have any substance. Miton’s Martin Gray, manager of the £883m CF Miton Special Situations fund, believes the “run has happened” and, while acknowledging some upside may remain, says he “wouldn’t buy in now”. City Financial’s David Crawford – who runs the firm’s top-performing long/short UK Equity fund – points out that strong performance based almost exclusively on government stimulus is bound to be short-lived. Investors only need look at the reaction of the equity and bond markets to the potential slowing of another form of stimulus, quantitative easing, to see that such catalysts cannot last forever. The UK government is desperate to prove it can help more people onto the housing ladder, and with Help to Buy it is helping first-time buyers to secure mortgages with deposits of as little as 5 per cent. Many of the same companies held by UK managers have specific ‘Help to Buy’ pages on their websites, detailing what aid there is available for first-time buyers – and giving a strong hint that this scheme has directly benefited them. “In a properly free market the value of houses would drop,” Mr Crawford says, adding that banks are still not lending prudently to borrowers trying to get on the housing ladder. He highlights banks that are granting mortgages equivalent to eight or nine times an individual’s salary, as opposed to two or three times. Martin Gray adds that the Help to Buy scheme “sounds to me like electioneering, which is a little worrying”. But for those still surfing the wave of housing-related stocks, the end is not yet in sight. Patrick Newens, small-cap fund manager at F&C, argues that the “electioneering” by the government through Help to Buy is likely to mean the scheme will last until at least the next election in 2015. He adds that house price-inflation has only just started feeding into companies’ figures and analysts’ forecasts. “Housebuilders are all seeing earnings upgrades and their margins are going up,” he says, leaving room for “decent upgrades” still to come. In addition, Aviva Investors’ Toby Belsom says it is not all about property prices and first-time buyers. He points to St Modwen Properties, LSL Property Services and Paragon Group – all top holdings in his UK Smaller Companies fund – as examples of property-focused companies that are not dependent on house prices. Instead the companies operate in longer-term projects, renting, and the secondary market. For these reasons Mr Belsom says he is “comfortable” with the stocks’ valuations, in spite of some very strong numbers so far this year. Opinion is split between those that did back housebuilders and have benefited from the move, and those who by their own admission have not, including Mr Gray and Mr Crawford. The debate is likely to continue for as long as the stocks themselves keep pushing higher, but with specialist property managers already having to hunt ever harder for attractive valuations, investors should be at least wary of increasing their exposure. Continue reading
Property Deals Surge In Peripheral EU Countries
http://www.ft.com/cms/s/0/1066d5e2-1301-11e3-a05e-00144feabdc0.html#ixzz2dv1eMdXb September 1, 2013 Property deals surge in peripheral EU countries By Ed Hammond, Property Correspondent The appetite for commercial real estate in Europe’s most beleaguered countries has soared during the past three months, underlining the growing confidence among global investors that the continent’s property crisis is nearing an end. The value of property transactions in Europe’s peripheral economies – Portugal, Italy, Ireland, Greece and Spain – hit €2.3bn during the quarter to July, an increase of 60 per cent on the previous three months, according to research for Cushman & Wakefield, the property consultancy. The surge in activity is almost entirely the product of a return of international investment into property markets that, for the past six years, have been considered too risky at almost any price. Non-domestic purchases of offices and retail property in Spain, for instance, rose by almost 10-fold from the first three months of the year to €642m. In Italy, the quarter-on-quarter increase was a more modest 190 per cent. “Club Med was out of bounds for most investors just a few months ago,” said David Hutchings, head of research in Europe for Cushman & Wakefield. “But it has taken only a slight improvement in risk tolerances for the bigger markets of Spain and Italy, in particular, to start gaining attention again.” And it is not just the private equity investors – typically the first movers in Europe’s distressed property markets – who have started to sniff out deals in the peripheral economies. Large, traditionally low risk investment groups, such as insurers and pension funds, are on the hunt for fixed assets too. Axa Real Estate, the property arm of the French insurer, has completed deals in both Italy and Spain during the second quarter of the year. “Investors, including us, are starting to move slowly up the risk curve again and are seeing those markets open up,” said Anne Kavanagh, global head of asset management and transactions at Axa Real Estate. “But there will not be a rush into the peripheral countries; it was, after all, only a year ago that we were talking about a possible break up of the single currency.” The burgeoning activity puts the cluster of countries, often unflatteringly referred to as “the PIIGS”, at odds with the wider trend in Europe’s property market, where demand, having risen steadily for two years, ebbed during the past three months. The large cities of the continent, London in particular, have become saturated with competition from US, Asian and Middle Eastern property buyers, driving down yields and forcing many European investors to eek out returns in regional or higher risk submarkets. Continue reading
Dry Farming Grows in West; Alltech, Kentucky State Form Sustainable Agriculture Alliance
September 3, 2013 Drought conditions and hot summer months are pushing many California farmers toward dry farming — and producing more flavorful produce , NPR reports. Happy Boy Farms sales director Jen Lynne says chefs and wholesalers from around the US are increasingly placing orders for the company’s dry-farmed tomatoes, grown near Santa Cruz. She tells NPR that she could sell hundreds of 14-pound cases a day if her 10-acre tomato field could meet the demand. Lynne says dry farming will become a vital sustainable agriculture practice as water becomes less abundant in the future. Whole Foods Market in Sebastopol says customers want dry-farmed tomatoes, NPR reports. However, according to Northern California farmer Stan Devoto, turning off the water does reduce yields. His dry-farmed trees produce 12 to 15 tons of apples per acre per year compared to his irrigated trees, which produce 40 to 50 tons, NPR says. Sonoma Valley winery Old Hill Ranch says dry farming wine grapes produces only slightly lower harvest yields. Winemaker Will Bucklin tells NPR that the grapes are smaller, which means a lower juice-to-skin ratio. Meanwhile, farmers in the Texas Panhandle, squeezed for water by a three-year drought and a declining Ogallalla Aquifer, are experimenting with planting corn without watering the ground first. They are planting later in the season so they can tap the summer rain and switching to pivot sprinklers for more efficient, affordable watering. In other farming news, Nicholasville, Ky.-based animal nutrition company Alltech and Kentucky State University have formed a joint research alliance to develop sustainable farming techniques and modern farming models. Alltech will invest $75,000 per year toward research at KSU and will also provide support for KSU graduate students’ research and for demonstrations in agriculture, food sciences, sustainable systems and related fields. Alltech chief scientific officer Dr. Karl Dawson says the farming alliance aims to position Central Kentucky at the forefront of sustainable agriculture and aquaculture and will have global implications. The Alltech-KSU Sustainable Farming Alliance will operate from the KSU campus and has been established for an initial period of three years. Environmental hazards such as climate change and water scarcity could wipe out as much as $8 trillion in agriculture assets each year, according to a study published last month by the University of Oxford’s Smith School of Enterprise and the Environment. Photo Credit: Happy Boy Farms Continue reading
