07 June 2012, In the week in which CEREALS 2012 – the high profile event for the arable industry – takes place in the county again at Boothby Graffoe (13th & 14th June), the latest piece of rural research from national property consultancy Carter Jonas points to country estate ownership as one of the best investments when it comes to asset performance and its stability as an asset class when set against a difficult economic backdrop.
The conclusion is drawn by the consultancy’s head of research, Catherine Penman in Carter Jonas’s Model Estate report which assesses the value of returns on investment for a notional, rural estate of 3,208 acres and compares the performance of other recognised asset classes including gold, wine, classic cars, equities and commercial and residential property.
The theoretical estate comprises a combination of let and in-hand farms, six let houses, 14 let commercial properties, plus a telecoms mast, syndicate shoot and fishing rights.
The Model Estate witnessed a £1.8 million rise in capital vale from its £28.2 million in 2010 and produced a total return of 6.5 per cent in 2011.
This gives the estate the third place ranking out of the eight recognised asset classes reviewed in Carter Jonas’s report. Gold occupied the top spot and then classic cars. The estate is up one place from the year before (2010) when it also lost out to fine wine.
When the component of the Manor House itself is excluded from the notional estate, the total return rises to 8.4 per cent – and up to 12.5 per cent when excluding the commercial elements, highlighting the impact of downward pressure on the residential property market outside of London as well as commercial rent reductions.
“While it would be possible to minimise negative event upon the model estate, it is deemed more realistic to continue to introduce these issues in order to highlight opportunities and challenges a typical estate may encounter,” explains Catherine Penman.
“While gold and classic cars were the only two asset classes to supersede the performance of the Model Estate, it’s important to emphasise that neither of these provide revenue return– unlike the estate.
“In addition, favourable taxation benefits reinforce the Model Estate’s ranking as high performing asset and when it comes to the Inheritance Tax regime (IHT), no other asset can compete with it for minimising liability and this can make up the difference in the asset’s capital value very quickly,” she adds.
Iain Nott, senior associate in the rural division of Carter Jonas in the eastern region, says the value of the report to land owners is the illustration it gives of how the assets can be kept productive yet tax efficient far more so than some other, more glamorous assets such as gold, classic cars or fine wine.
“One of the advantages of the estate is that it’s tangible and usable.
“Unlike a classic car or a cellar of fine wines – an estate can generate substantial revenue together with capital growth which can be passed on to future generations to enjoy.”
“The Model Estate report show’s what’s possible with the right professional advice and management and how income diversification can be achieved by taking a fresh look at what you have and how you can use it.”