Agricultural income declining for rural estates

Agriculture’s contribution to the profitability of rural estates is falling, according to Savills’ Rural Estate Benchmarking Survey.

The property firm’s latest figures, which cover almost 345,000ha (850,000 acres) on 175 estates, show that income from all agricultural sources fell by 2.4% to £120/ha (£48/acre) for the year ending 5 April 2006.

This still accounts for more than one-third of the average estate’s gross income, but is far less significant than 10 years ago when farming’s contribution was more than 60% of gross income.

Agricultural Holdings Act rents grew by 4.1% over the year to £150/ha (£60/acre), but Farm Business Tenancies fell 4.4% to £178/ha (£72/acre). The area of land let under FBTs rose to almost 30% in 2006, compared with 10% in 2000.

Michael Horton, Savills’ head of estate management, said: “Despite the pressures on all aspects of the agricultural industry, farming is still a major contributor to the income of the average rural estate.

“We believe the industry is turning a corner. With commodity prices improving and increased demand for alternative energy crops, it will be interesting to see whether this puts upward pressure on agricultural rents.”

Overall, net estate income grew by 5.2% to £195/ha (£79/acre) on the back of rising residential and commercial rents. The average annual return from houses let under Assured Shorthold Tenancies was up 2.6% to £6511.

Income from all commercial and leisure sources rose 2.8% to £57/ha (£23/acre). The income from let commercial property was up 7.1% to £46/ha (£18.47/acre) and now accounts for 13% of total income.