UK market review - number 27, 2011

Amongst those of us who aspire to living in a quality country house, most still have the urge to 'put down roots' and so, traditionally, prefer to buy. This is still so, but the consequent low rents (relative to value), combined with recent mortgage restrictions and the growth of some regional employers has boosted activity significantly. As a result, having been almost non-existent for decades, a small but significant country house rental market has emerged in A many regions. Alongside, the value of agricultural land, having hovered around £3,000 per acre for many years, has increased markedly over the last three or four years. Our Woburn office's recent sale of 75 acres at £6,000 per acre is typical.

These factors, along with fluctuating fortunes in the residential sales market, have created interesting times for our rural estate managers, whose roles include advising on long-term portfolio strategy. A common thread is that the rural economy is far from being the primary driver of value. The earning capacity of agricultural land, for example, has been enhanced by growing commodity prices, but only its 100% exemption from inheritance tax explains why buyers are happy to pay 40 times the annual rent from a contract famer. Similarly, most estate cottages are no longer rude abodes for old-style farmhands, but fully modernised homes for commuters. Beyond commuting distance from major employers, there is almost no demand for anything other than holiday lets.

The recession's 'squeeze on the middle classes' has prompted some owners to sell and then rent, so releasing capital to pay for school fees, nursing home fees and clear debts. The claim is that this is a 'lifestyle and values choice' that will embrace renting forever and is doubtless sincerely meant. We can’t help noticing though that, in almost every case, its practitioners appear to hold quite a lot back. Certainly enough to be sure that, when prices start rising sharply again, they will be able to buy a bijou cottage for when the children have flown the nest, in cash. Long term habits die hard.