___________________ Jonathan Allright Head of AMC Email: - - PowerPoint PPT Presentation

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___________________ Jonathan Allright Head of AMC Email: - - PowerPoint PPT Presentation

Oct 18, 2022 33 likes •225 views

Interest Rate Risk and Land Prices ___________________ Jonathan Allright Head of AMC Email: j.allright@amcplc.com Tel: 01264 386321 13 November 2013 AMC 1 Agenda Interest Rates - Risk Volatility Base Rate (Official Bank Rate)

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1 AMC

Interest Rate Risk and Land Prices ___________________

Jonathan Allright Head of AMC Email: j.allright@amcplc.com Tel: 01264 386321

13 November 2013

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2 AMC

Agenda

  • Interest Rates - Risk
  • Volatility
  • Base Rate (Official Bank Rate)
  • Fixed Rate
  • Land Prices - risk
  • Interest Rate
  • Poorer returns
  • Less investment money
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3 AMC

VOLATILITY

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4 AMC

IMPROVING SENTIMENT IN EURO AREA BOND MARKETS

Source: Haver Analytics

  • 5

5 10 15 20 25 30 35 40 2005 2006 2007 2008 2009 2010 2011 2012 2013

Greece France Portugal Spain Ireland Italy

% spread over German Bunds

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5 AMC

50 100 150 200 250 300 350 400 450 500 550 Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Bps

UK Banks CDS

I.P Owner: Liquidity & FX Solutions

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6 AMC

Easing in bank funding costs

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7 AMC

The downturn in perspective

Source: LBCB 2008 2009 2010 2011 2012 2013 2014 2015

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8 AMC

BASE RATE

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9 AMC

Source: Bank of England

Bank of England Official Bank Rate 1970 - 2013

Source: Bank of England

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10 AMC

From 2013 Avg Rate No of changes 25 yr average 6.98% 87 20 yr average 5.06% 58 15 yr average 4.64% 42 10 yr average 3.83% 23 From 2007 Avg Rate No of changes 25 yr average 9.30% 157 20 yr average 7.66% 86 15 yr average 5.73% 53 10 yr average 5.40% 38

Source: Bank of England

Bank of England Bank Rate Changes

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11 AMC

We get used to the current ‘status quo’ too easily….

Interest cost in 2013 £100,000 at 2.5% + 0.5%obr £3,000 Interest cost in 1989 £100,000 at 2.5% +15%obr £17,500 Interest cost in 2008 £100,000 at 2.5% +5%obr £7,500

Will interest rates rise – how quickly and by how much?

Today 5 years ago 24 years ago

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12 AMC

FIXED RATE

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13 AMC

Source: Lloyds Bank CB

Government 10 year nominal par yields since 1957

%

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14 AMC

Source: Lloyds Bank CB

Long term rates heading higher

Fed tapering speculation Improvement s in US economic data

Improvements in US Economic data

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15 AMC

Agenda

  • Interest Rates - Risk
  • Volatility
  • Base Rate (Official Bank Rate)
  • Fixed Rate
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16 AMC

LAND PRICES

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Land Prices

Source: MAFF/Defra and Knight Frank Research

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18 AMC

Diverse market - how finely balanced? Upside fundamentals

  • Low supply
  • Safe asset – finite product
  • Tax benefits
  • Food & Fuel
  • Population & wealth growth
  • Demand Factors: Food, Energy, Housing, Commercial, Investor,

Minerals, Leisure Downside risks

  • Interest rates
  • Debt + poor profitability
  • Shift to resi & com property
  • Tax changes
  • Subsidy reduction Eurozone

collapse? EU exit

Source: Savills Research

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19 AMC

Summary

  • Volatility – structure your debts correctly
  • Artificially low rates – stress test your business at higher margins
  • Land values – plan using average years
  • PLAN and have a good team around you…