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The 2013 survey results show that average gross income on ‘All Estates’ increased 5.3% to £212 per acre across the whole estate (including woodland), which represents stronger growth than recorded during the past few years.

Cost-saving measures proved effective at capping total expenditure (up just 0.2%) at £88 per acre, which resulted in a significant 9% increase in net incomes (before depreciation, finance, drawings and tax) to £124 per acre.

Graph 1 shows the change in proportion of income derived from the key sources on rural estates. The most significant change is the increased income generated from the commercial and leisure sectors reducing agriculture’s overall contribution to 35% in 2013 from almost 50% in 2000.

Agricultural income

The agricultural assets of rural estates continued to perform well – keeping pace with inflation. Average income from all agricultural sources on ‘All Estates’ rose by 2.3% in 2013 to £73 per acre and represented 34% of gross income. Looking specifically at the let area of the average estate, income from all let agricultural sources in 2013 increased by 13.7% to £93 per acre – mainly driven by FBT growth.

Due to the difficult harvest in 2012, in hand farm incomes (net income after deduction of property repairs, insurance, third party rents and interest on borrowed working capital) on ‘All Estates’ fell by -33% to £88 per acre in 2013 and similarly income from contract farming (‘All Estates’) enterprises fell by a similar proportion to £111 per acre.

We expect pressure on tenanted and in hand operations to continue as the additional costs of redrilling 2013 harvest winter crops with spring crops takes its toll on cash flows into the 2014 harvest year.

Our survey shows growth in average passing agricultural rents in 2013 as strong commodity prices led to rental increases:

• Agricultural Holdings Act (AHA) rents on ‘All Estates’ strengthened by 4.8% during 2013 to average £73 per acre.

• Farm Business Tenancy (FBT) rents on ‘All Estates’ increased by 12.3% in 2013 to average £103 per acre.

• See Table 1 for agricultural rents by farm type.

The FBT area continues to increase and now represents 40% as a proportion of the total let agricultural area.

This, with the diversity in values, is illustrated for FBTs in Graph 2 on page 6 using data from our rents database. Detailed analysis suggests that active management and engagement with tenants is essential for maximising returns and opportunities for both parties in all sectors; not only agriculture.

The average surplus for let agricultural property (after property repairs, share of general estate repairs and other expenditure including management costs) on ‘All Estates’ has remained stable at around 54% for the past four years.

Residential income

Average income from residential sources on ‘All Estates’ increased in 2013 by 4.6% to £84 per acre and represented 40% of gross income.

This growth is a combination of rental increases and a continued increase in the proportion of ASTs; 56% of all properties in 2013 from 50% in 2011.

Our survey also recorded a fall in the proportion of residential properties tied up in agricultural tenancies or in hand operations from 28% in 2011 to 23% in 2013.

• Average annual rental income of Assured Shorthold Tenancies (AST) on ‘All Estates’ increased by 4.6% during 2013 to £8,723 per dwelling.

• Average regulated rents on ‘All Estates’ increased by 9.5% to £5,250 per dwelling.

Our research indicates that AST void periods have increased to 6.4% in 2013 from 3.5% in 2012 and are now at the highest level for five years.

New to our survey this year is average AST rents by house type. Average rents ranged from over £31,000 per annum for manor houses to under £7,000 per year for one to two bed flats as illustrated by Graph 3.

Table 2 illustrates how location affects AST rental levels with the South East of England recording the highest average AST rents at almost £10,500 per dwelling although there was pressure at the top end of the rental market with the South East recording a -5% fall in average AST rents in 2013 – the only region to record a fall during the 2013 survey year.

Evidence suggests that we may be beginning to see two tiers in residential rents as demand for large properties weakens with high running costs being a factor.

Proactive tenant management along with a realistic pricing policy will be necessary to ensure that voids are minimised and income maximised.

At the lower end it is envisaged that demand will remain strong as raising equity to buy remains difficult for many although this may be tempered by ‘Help to Buy’ schemes.

The average surplus for all let residential property on ‘All Estates’ in 2013 was 30% and comparable to the 31% recorded in 2012. ASTs recorded a higher surplus of 44%.

Taken from
Estate Benchmarking Survey 2013