10 July 1998

Running & repair costs key figures on estates

By Louise Rose

PROPERTY repair and management costs on all types of estate were the key expenditures during the period 1995 to 1997 with in absolute terms expenditure on management rising for most estate classes by upto 12.2%.

"Despite an overall rise in average incomes outgoings on property repair rose for most estate classes by between 12.9% and 160% in absolute terms with management costs rising in most cases by up to 12.2%," according to the FPDSavills land management performance analysis – an estate benchmarking service – now published for 1997.

However net margins rose on all classes of estate ranging from 4.1% for all mixed property estates to 57.3% for residential and agricultural estates – mainly due to the improvement in agricultural and residential incomes during the two years between 1995 and 1997.

But to offset the recent decline in agricultural incomes landowners now must tightly control expenditure costs, says Matthew Bush, FPDSavills research.

And these costs varied for the different classes of estates analysed in the survey, the top performing mainly let agricultural estates generated a gross income of £86.89/acre from 26% less expenditure – a net margin of 78.5% – than the average estate which produced £68.30/acre, an average of 63%.

Furthermore, the average estate net margin for the residential and agricultural estate class and the mixed property estate class were 55.2% and 55.7% of gross income, respectively, due to the higher property repair and management cost liabilities.

The largest range of repair expenditure as a percentage of gross income occurred in the mainly let agricultural estate class with a high of 36.6% and low of 6.4%.

"Over the two year analysis period expenditure on property repair, in absolute terms, rose on most estate classes by between 12.9% and 160%," said the analysis.

And average property repairs as a percentage of gross income were evenly spread across all estate types ranging from 13.2% to 20.6%, excluding the value of improvements which is analysed separately.

Management costs for 1997 include a notional figure representing an owners management time that would otherwise be attributed to a paid land agent. As a percentage of gross income management costs varied form 5% for mixed tenure agricultural estates to 45% for mixed property estates.

In 1997 the average rent level for Agricultural Holdings Act tenancies let on traditional repairing terms was £51.34/acre with growth in Farm Business Tenancy rental income equating to 45.6% – rental levels averaged £103.28/acre.

However, rent settlement levels on AHA tenancies for all arable land averaged £60.88/acre and averages on grade 3 land were £57.42/acre for arable farms, £61.10/acre for dairy units and £45.75/acre on livestock units.

Residential property income during the same period rose by 24.7% to average £3112/property/year.

"Residential property repairs in 1997 rose by 21.5% from 1995 averaging £1091/dwelling in line with the further rise in residential rental income, but as a percentage of rental income repairs remained fairly static at 35.1%," it said.

The estate benchmarking analysis is split into five different estate types comparing varying amounts of let farmland, in hand land, lowland, upland, residential property and other property with the results covering year ends falling in the twelve months to April 1997, for the four lowland estate classes.

Estates are ranked according to high margin – the highest net margins measured as £/acre – and low cost – the highest net margins measured as a percentage of gross income.

ESTATE CLASS

Classes 1 and 2: Primarily agricultural with an average of more than 75% of estate income derived from agriculture.

Class 1: Mainly let agricultural estates averaging 9498 acres including 8536 acres – 90% of let farmland and 96 houses and cottages.

Class 2: Mixed tenure agricultural estate averaging 5714 acres including 47% farmed in hand.

Class 3: Residential and agricultural lowland estates characterised by the proportion of income generated from residential property. Averaging 6595 acres including 2423 acres of let farmland and 112 houses and cottages. The estates include a mixture of land uses including an average 1034 acres of woodland and 976 acres of other farmland including contract farming and seasonal grazing.

Class 4: The mixed property estate. A significant proportion of income is generated from commercial or leisure property from estates averaging 8990 acres including 154 houses.

Class 5: Upland estates. Not analysed in the survey.