05 Feb The prospects for the super-prime country house & estates market
Last week, I wrote a market insight piece for leading industry publication, Prime Resi. Things in the Prime Market appear to be warming up earlier than usual in advance of the anticipated pre-election lull whilst the Super Prime farms and estates market continues to outperform expectations with the last year feeling particularly busy both in terms of sellers and buyers. Below are my thoughts on how things will look over the next 12 months…
‘As we enter 2024 there are over a £1bn worth of super-prime rural farms and estates available to buy – and the majority of these are only available off-market’
This time last year, the outlook for 2023 was bleak (writes country buying agent Jess Simpson). The cost-of-living crisis was taking hold, interest rates were increasing due to a loss of confidence in the markets following Liz Truss’s fiscal experiment and the Bank of England was buying long term gilts to prop up the pension system avoiding a £380 billion shortfall. With inflation at just over 10% and no real prospect of interest rates reducing (only increasing) a recession appeared to be inevitable.
The super prime country house market (£10m plus) is not affected particularly by interest rates. Most buyers use cash and activity is dictated by market and political confidence. If the stock markets are steady and we have a relatively stable political situation (which is most of the time bar a referendum or a general election), then the best quality property trades well. Opportunities at this level are scarce and finite. The political and fiscal activities at the end of 2022 caused prices to drop back slightly in 2023. This was an anticipated post-Covid correction in pricing. The houses most affected by this were those more than 1.5 hrs from London, houses requiring a large amount of work and those that entered the market and were overpriced. Country houses in hotspots such as The Cotswolds remained resilient.
We will probably see a busy Spring, with those thinking of selling within the next 12 months having been (rightly) persuaded by their agent to go early before (as with every election to date) the market hangs it boots up.
At the beginning of 2024, Bank of England interest rates have stabilised, bank rates have come down and inflation sits currently at around 4%. However, it is likely that we will see a general election before the end of the year. This means that we will probably see a busy Spring, with those thinking of selling within the next 12 months having been (rightly) persuaded by their agent to go early before (as with every election to date) the market hangs it boots up whilst we await the inevitable Labour victory and all that entails…Very wealthy UK based individuals and family offices worry about the penal tax implications of a Labour government and are likely to delay making decisions until definitive outcome is known.
The farmland and estate market are driven by slightly different dynamics. The value of farmland has never reflected farm profits/food prices. It is generally seen as a low-risk tangible investment which is extremely tax efficient. The new ELMS subsidy schemes and the emerging private markets for carbon and BNG have contributed to strong increase in prices throughout 2023 with some areas regularly achieving £15,000 per acre or more in competition. The most desirable land is attractive marginal land in Central/Southern UK close to growing urban areas where buyers are “rolling-over” their capital gain or larger landowners are further increasing their holdings. We have seen an increase in the amount of land sold last year – Savills report 15% more than the 5-year average. This is largely due to marginal farmers retiring with the phasing out of the basic Payment Scheme subsidies and rising interest rates/debt.
We had a record year in 2023. Over £150m of property was purchased with an average deal size of around £10m. Many of these purchases were made on a private or off market basis. Of the properties that were bought on the open market all were done so due to the high price expectations of the seller and the need for those to be tested in the open market.
There were at least eight deals agreed off-market for over £20m.
Super prime rural estates (over £10m and 100 acres) are trophy assets purchased for either legacy reasons or lifestyle/investment. Due to the rarity of these assets, the market is discretionary, and the influencing factors tend to be personal rather than market led. Many sellers will only sell if they get the price they want and if the estate is special enough – they will generally get it. 2023 saw several estates with substantial houses requiring a large amount of work, that had been on the market for some time eventually sell with hefty price reductions. Conversely there were at least eight deals agreed off-market for over £20m.
As we enter 2024 there are over a £1 billion worth of super prime rural farms and estates (over £10m and 100 acres) available to buy and the majority of these are only available off market. This is 15% above the market quantum at the same time last year. This could be due to pre-election decisions but also worth remembering that some of these estates have been available for some time but on a highly discretionary basis.