5 July 2002

Estate owners failing to maximise income

By Andrew Shirley

ESTATE owners have some way to go before realising the full income potential of their properties, according to figures released by FPDSavills at the Royal Show.

Overall returns are still extremely low as traditional forms of revenue decrease, said head of research Jim Ward, who was presenting the latest instalment of the firms estate benchmarking survey – based on a sample of 127 lowland estates covering a total of 240,000ha (600,000 acres) with an average size of almost 2500ha (6200 acres).

Income from Agricultural Holding Act 1986 tenancies fell to £143/ha (£58/acre) in 2002, down from a peak of £168/ha (£68/acre), while Farm Business Tenancy rents slipped to £205/ha (£83/acre), from a maximum of £250/ha (£101/acre). But the returns from in-hand farming increased to £50/ha (£20/acre), following three loss-making years.

But Mr Ward said it was difficult to see an upturn in the fundamentals of agriculture, making it ever more important for estate owners to diversify the income generated on their holdings.

Although some estates have opted for completely new schemes such as golf courses, bricks and mortar remains the favoured route.

Many estates have a large stock of housing and redundant farm buildings, but generating extra income from them is not always easy, reckoned the researcher. This is highlighted by the fact that the average return on capital from estates agricultural enterprises was almost 3.5%, compared with 2.5% for residential properties.

Mr Ward said this was mainly because estate houses had suffered from a lack of investment, meaning overheads at 45% were much higher than the 25%, which is usual for urban properties. Rent rolls are also 44% less than open market values because many dwellings are subject to regulated tenancies which bring in lower rates, typically £2900/year.

However, residential income had increased by 11% over the past two years as older agreements were replaced by assured shorthold tenancies which generated an average of £5193/ dwelling in 2002. "There is lots of potential for incomes to increase," said Mr Ward. But it was unlikely returns would equal the 6.5% achieved by urban portfolios, he added. &#42