London 9 May 2012, Carter Jonas’s latest performance review of the Model Estate has reinforced its value as, “a high performing and stable asset class during a difficult economic backdrop,” according to the property consultancy’s head of Research, Catherine Penman.
The report, prepared by Penman, 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, antiques, classic cars, equities, and commercial and residential property.
With a total return of 6.5 per cent in 2011, the Model Estate is ranked third of the eight recognised asset classes reviewed in the report, after gold (1) and classic cars (2). The estate is up one place from last year when it also lost out to fine wine.
The theoretical property, which 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, is located within the geographical triangle bounded by the M4, M40 and M5 motorways and hypothetically managed by Carter Jonas (www.carterjonas.co.uk).
The Model Estate witnessed a £1.8 million rise in capital value from its £28.2 million in 2010 and produced a total return of 6.5 per cent. This compares to a total return of 7.0 per cent achieved in 2010, underpinning the Model Estate’s value as a concrete asset during a period of unfavourable economic outlook.
Agricultural land as a sole component outperformed all other asset classes apart from gold. As the scarcity of an asset class continues to make it secure as an investment, the agricultural land market has proven to be a safe financial haven for investors and as a result, prices have soared over the past half decade, reaching record levels in the latter half of 2011.
When the component of the Manor House 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 and commercial rent reductions respectively.
“Whilst it would be possible to minimise negative events 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 Penman.
Gold and classic cars were the only two asset classes to supersede the performance of the Model Estate in 2011, but it is important to emphasise that neither of these provide a revenue return nor a significant lifestyle benefit, unlike the estate.
Tim Jones, head of the rural division at Carter Jonas comments, “Unlike other asset classes, the Model Estate is a timeless, tangible asset. Moreover, it’s productive and offers investors exposure to a number of sectors, providing opportunities to diversify their income streams in order to adapt to market conditions.”
In addition, favourable taxation benefits reinforce the Model Estate’s ranking as a high performing asset and when it comes to the Inheritance Tax Regime (IHT), no other asset can compete with the Model Estate for minimising the liability, and this can make up the difference in the asset’s capital value very quickly. “The advantages offered by this asset class in terms of the financial stability it delivers, and fiscal advantage it offers, fuel capital growth as supply remains tight across the market,” concludes Penman.
For press information contact Gemma Haimes, head of PR, Carter Jonas, 020 7298 1822 email@example.com