Rental yield in decline for 96 between 4-5%
By Louise Rose
BASED on the estimated rental value investment yields dropped to between 4% and 5% for reasonable agricultural units during 1996.
"With only about 20,000-25,000 acres traded on the open market annually," says Steve Humphris of agent Knight Frank, "in 1996, private investors and family trusts competed with sitting tenants, who either had spare cash or were able to borrow funds at low interest rates, and wanted to benefit from their farms vacant possession value."
Rents reviewed under the Agricultural Holdings Act in 1996, in some cases for the first time in many years, showed average increases of 25-30%.
However rents are still lagging behind farming profitability with some rental and related capital growth still to come during 1997, said Mr Humphris.
Also the traditional let agricultural estate is becoming a diminishing commodity now that all new lettings are created as farm business tenancies and succession tenancies decline.
Major transactions of the year (see table) included the purchase of the Croome Estate by the Merchant Venturers for over £14m. Although the new financial institutions kept out of the market, they showed more of an interest than in the recent past, said Mr Humphris.
"The traditional institutions including the Crown Estates and Oxbridge Colleges continued looking for investment opportunities albeit with a conservative view as to value while the Church Commissioners are reviewing their portfolio and remained out of the market," he said.
Major sale transactions during 1996
Stoneham Farm, nr Lewes, E Sussex7474.04£1.1m
Actual Rent £44,915, sold April 1996(Strutt & Parker)
Toft Newton Estate, nr Market Rasen, Lincs6894.13£0.75m
Actual Rent £31,000, sold March 1996 (Strutt & Parker)
Avington Manor, nr Winchester, Hampshire10203.15£1.51m
Actual Rent £47,500, sold January 1996 (Strutt & Parker)
Gunthorpe Estate, Norfolk29483.86£3.255msold January 1996, let+£0.945m(Brown & Co) for other assets
Risby Estate, North Humberside26664.15£2.95m
sold January 1996, (Brown & Co)
Stanford Rivers Estate, Essex9995.17£1.45m
sold May 1996,
Croome Estate, Worcs68883.4£14.1m
Gross Rents £510,509, sale agreed Aug 1996,(Strutt & Parker)
Dyrham Estate, nr Bath, Avon17704£2.25m
Gross rents £90,000, sale agreed recently, Guide(Savills)