Tuesday 4 November 2014

Morning Mumble (late): Housing & Coal

It has already been a few days of speaking with conveyancers and meetings for a house and flat sales/purchases. What is often interesting when dealing with companies is gaining a wider helicopter view understanding of the market.

The auctions have been tailing off from the summer (not uncommon) with a few (Inc. myself) being out bid on most properties from March to September. The achieved price is now significantly lower (near 11% lower than the summer), and the number of interested parties appears to be well down. Seasonally it’s not uncommon, but one factor cited is the affordability elements of the mortgage applications even for clients porting their mortgages to a new property. Positively it is limiting the competition so for the buyers out there are some decent purchases to be had.

Examples being, there is a reduction in borrowing capabilities of home owners or the more common situation occurring being limitations of additional funds to up size. Yes, this is positive in cooling the property market and reducing the risks of a boom albeit contradictory when considering the Help to Buy (H2B) that is meant to assist people on to the market. Historically, I'm from an era of 3.5 times main income plus 1 of the income.

The lawyer's example of the couple had an income for Mr & Mrs A of £45K & £11K, borrowing potential of £166K in the olden days. It would appear the Government Bank differ on this and have approved them for a paltry £104K of borrowings. Perhaps an extreme example of miscalculations/assessment with no other liabilities (no loans nor student loans etc.) one assumes they'd have been lent upwards of £130K. 

The firms I'm dealing with at the moment are finding most of their work is around £105-£250K (North) and £285-£445K south with a large reduction in properties over £500k. Implying the peek has come, with demand tailing off and supply stagnating. This is with no surprise when you consider the recent London developers announcements about cooling off and normalisation of sales.

It has however got me thinking that the housing market is likely to have some form of coming. Whilst speaking with solicitors they note that a lot of sales are being repriced lower (reductions on the offer) even for current home-owners when the affordability terms applied, This is happening even for those porting mortgages from one property to another. It could be construed as the "housing cap" rather than blowing the bubble.

Its uncanny that today's interim management statement by Persimmon Homes (PSN) with PSN stating, "As expected we have experienced a return to a more traditional seasonal pattern to customer activity this year with reservation rates picking up with the onset of the autumn season after the slower summer weeks."

One does have to acknowledge that PSN has good forward visibility on their reservation interest circa £696 million of forward sales reserved beyond 2014, an increase of 12% on the same point last year (2013: £622 million). Perhaps one would be wise to call that the steam.

Its wise to keep my opinions to myself about timber framing after seeing a property being totally rebuilt (bricks only) recently as a result of being incorrectly tied in, could this be a problem for the future. PSN's Space4 timber frame had an analogy recently by a brickie to..."Space4 another home in a few years." One would be wise to consider the significant of "a more traditional" seasonal pattern in conjunction with affordability rules.

Glencore's Interim Management Statement for the 3rd Quarter  was positive in terms of underpinning copper (own source) up 8%, Ferrochrome up 5% and own sourced coal up 7mt to 111.4Mt (7% gain). GLEN's Zinc was just ahead of my expectations with the ramp up in the Australian ops (McArthur River and Mount Isa) and Perkoa avoid some of the consequences of closing the Perseverance and Brunswick mines.

Quite how GLEN will performing with the market outlook for coal for the next 12-18 months is riskier for the long only fraternity. Expect some small acquisitions to consolidate the super-cycle, watch out quality AIM companies. (Easy to identify). As such, with the outlook for coal and the risks to copper due to the control by certain parties, GLEN's a good intra-day trade on the news. With Japan going in the opposite direction to the US, the markets will go following the good news.

Limited time for AB Foods  (but they do miss the managements own LFL sales improvements by 0.5%) and the drinks announcements yesterday, post a telecon I may return to them. Surely I do not need to comment on the sugar outlook we all know too well...just in purchasing it.

Could LGEN's Q3 IMS  bode well for the listed annuity providers with LGEN breaking the trend? Some really good news for HomeServe in the member agreement with AARP. One certainly to watch...

Atb Fraser

6 comments:

  1. Fraser- Hi- After seeming to get the issues with FTML sorted, I had to pull the battery out of my PC at the end to log off!!-- not ideal really but I wont use Chrome or Firefox as my brother is employed mainly to fight against the hacks that they seem to encourage- scary stuff and it ties up with the increased speed these pieces of software offer. Good luck to all who use them and think they are secure.

    Re AMI- yes, nice work from Dan at the FT there. I knew that $50m would have to rear its ugly head again and this seemed the opportune moment. I wouldn't really want to be a minority shareholder in AMI but as we know the simplest option would be to take them private, albeit your 23p is rosy against my ENRC type offer of a miserly 5p. Could his name be further tarnished if he went in low ball...and would be give two hoots... hmmmm.. :-))

    Re IGAS- good news on a bad day for oil/gas. The major issue was always that the shale gas would be in completely different formations to the US (who are the experts in this field given their acreages) but the good news is that there are similarities with existing deposits, which will knock 2 years off the possible development pathway here. They will look at multiple drills in 2015, which will split up the eco warriors into v small groups, which is a v sensible tactic and the law is now v much behind developers. Perhaps these eco warriors will consider where the fuel they use to drive to sites and to heat their houses/caravans comes from and desist from using it from now on. Im long IGAS, but early in my tranches so I welcome the current weakness here.

    Cheers. The Leggie

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  2. The Article: http://www.ft.com/cms/s/0/58163740-6123-11e4-b935-00144feabdc0.html Indeed Leggie, a fine piece by Dan, albeit some quite public already. The questions that really start to get interesting is if they get hold of the Marston Ownership structure and GIO shareholders.

    I was too busy with ASC today to find time for Igas I still have to get back to covering http://www.investegate.co.uk/caledonia-mining-crp--cmcl-/rns/revised-investment-plan-and-production-projections/201411030700088965V/ Caledonia Mining Crp's Revised Investment Plan and Production Projections, with some items not as simple as they would first appear.

    Its this time of year when it rains that I must look at a visit to the Congo as Semi-Meaty Pork Ribblets are all the rage...plus other items such as tractors!

    Atb Fraser

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  3. Fraser- Pork, tractors, slum dwellings, diamond dredging plots, the Congo... have you ever considered the part of a Bond baddie... if you have a cat that can sit on your knee, Mr Blofeld perhaps :-))

    Have a great evening.

    Cheers. The Leggie

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    1. As an investor I suspect most people cover that! I just get a bit more involved and earlier nowadays. I don't own a cat nor want one:) Dogs all the way me! I have an animation that was made about Ian and I a few years back, I'll post it. 1st June 2012...if Ian's awake and reading this. TC F

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    2. Leggie - I think you missed 'slum wines' in your list of the great man's business interests - given Fraser's threat to send a sodastream with the Blue Nun.

      (Actually 'slum wines' and 'slum champagne' has a nice ring to it - perhaps it could be like the Wonka bar - one in a million bottles has a diamond in the bottle).

      roddy

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    3. Roddy- haha- yes, a man of many talents, Blue Nun is perhaps the equivalent of the semi meaty pork riblets, which I gather have been easier to source since the badger cull has resumed. Hmmmm. Cheers. The Leggie

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