Survey reveals rise in estate income and rents during 2007/08

Rural estates showed a marked improvement in profitability in the ealy part of this year, with a larger proportion coming from agriculture, according to the latest Savills Estate Benchmarking Survey.

Gross incomes on rural estates in England rose by 7% in the 12 months to 5 April 2008, the survey found, and the upturn in commodity prices experienced during 2007/08 meant the income from all agricultural sources increased by 9.3% to just under £136/ha (£55/acre) – the highest since the survey began in 1994.

Average Agricultural Holdings Act tenancy rents on all estates were also found to have strengthened, by 13% during 2008 to £163/ha (£66/acre). Farm Business Tenancy rents increased 4.2% in 2008 to £186/ha (£75/acre), although there were large regional variations.

The rise in commodity prices led to a significant improvement in average in-hand farm incomes (net income after deducting property repairs, insurance, third party rents and interest on borrowed working capital). They increased 86% in 2008 to £185/ha (£75/acre) bringing them closer to FBT rents for the first time in ten years.

All the other main sources of income also showed an increase, but the greatest (25%) was income from leisure assets. Commercial income (including workspace and telecom masts) increased by 17% and these sectors contributed £37/acre, equivalent to over 22% of the average estate’s gross income.

Residential income contributed 36% to total gross income at £60/acre (£148/ha). Other sources, including land fill sites and anaerobic digestion plants, made up a further 8%.

The survey also found that total expenditure on all estates increased by just 1.9% during 2008. That was significantly less than inflation and suggested that effective cost management was a strength of rural estates.

But while incomes had generally been boosted in 2008 by the upturn in agriculture, the survey concluded that the sector would be under pressure as commodity prices fell and the price of inputs remained high. Cost management would therefore be crucial going forward, Savills said.