Although return on capital is not the top objective for many estate managers, especially where the core estate will be passed to the next generations, it is important, particularly since the significant increase in asset values during the past 10 to 15 years, to be aware of an estate’s asset performance in comparison to alternative investments.

The average estate is now worth in the region of £35 million and an assessment of performance is useful for estate strategy. In the year to 5th April 2014 the average Total Return for ’All Estates’ on all Let Property was 9.5%, the sum of a net income return of 1.2% and capital growth of 8.3%.

This is a stronger result than recorded in the previous year, primarily as a result of improved capital growth for residential property.

Farmland continues to contribute a significant proportion to the performance and we see this continuing. Our latest analysis of the farmland market shows that capital growth during the first half of 2014 remained strong, especially for the best quality, and has exceeded our expectations.

The average growth for prime arable land across Great Britain during the first half of 2014 at 9.8% was almost four times that recorded for prime central London residential property at 2.5% for the same period.

Estates Index

Our ‘Estates Index’, which examines the individual capital values of the core components of rural estates including marriage value (the premium) also shows that total estate values have increased by 8.0% over the past year with values now 9.1% above their peak at June 2008.

Again, the farmland and farm buildings continue to make a significant and increasing contribution to the total value – from 18.5% in December 2005 to 35.6% in June 2014. Graph 6 illustrates the change in value distribution across the index.

Meanwhile, the main house continues to represent a decreased proportion of total estate value, falling from 44.5% in December 2005 to 33.5% in June 2014. Similarly, marriage value now accounts for 10.0% of the total estate value, compared with 14% in 2005.

Taken from:
Estate Benchmarking Survey 2014