Both ways for land prices
and a question mark over rural conversions
The most recent RICS statement on farmland
values reports a 4.6% year-on-year fall in prices to an
average £9,370 per hectare (£3,794 per acre),
with more than 50% of buyers being non-farmers. Jackson-Stops
& Staff’s own experience corresponds
with the RICS findings to some extent, but the prevalence
of non-farming buyers means that achievable values vary
enormously,
rendering averages near meaningless. Thus remote and large
tracts of land might struggle to reach £2,000 per
acre, yet we regularly see £10,000 per acre for
well located plots of ten to twenty acres, even more for
smaller plots. Beyond that size, the value to a single
buyer tends to diminish rapidly; purely agricultural buyers
can rarely justify paying more than £3,000 per acre,
even for prime arable land.
A welcome source of income for many farms has been rent
from farm buildings converted to offices. Officially encouraged
by government planning guidelines in preference to residential
conversion, this policy has been questioned by some environmentalists
and local groups because it results in increased vehicle
traffic, often on small and previously quiet lanes. Research
by Harper Adams college for the RICS has also shown that,
far from creating jobs for unemployed rural people, most
rural office conversions attract entrepreneurs from cities,
who bring in reverse commuting’ staff from outside
the area. The RICS has suggested that the policy should
be altered to favour development in market towns and large
villages, possibly making permission for rural residential
conversions easier to obtain. It is often assumed that
farmers would welcome this. Some would, but as our farming
clients regularly point out, the mixed commercial
and domestic nature of a typical farm can make offices,
whose occupants are less worried about occasional noise
and who are not there at the weekends, a much better fit.
With over 50% of buyers of
agricultural land being non-farmers, the huge influence
of location on values reduces the usefulness of national
average land prices.
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| JSS
PRIVATE FINANCE |
Perils of long-term fixed
mortgages - and a neat alternative
As mentioned elsewhere in this publication, a number
of lenders are now in the remarkable position of
offering ten year fixed loans at rates below their
standard variable rates. If, like many people, the
idea of fixing at below 5% for a whole decade holds
great appeal for you, remember first that the security
on offer works both ways – the lender has you
tied up for a decade too, typically on pain of a
stiff exit penalty. Five percent is not unusual.
If you seriously believe that little in your life
will change over the next decade, this may not be
a deterrent, especially as most fixed rate mortgages
are portable, should you wish to move. But the terms
of the loan, including the lender’s restrictions
on how much they will lend and on what types of
property, move with it. Decide to set up your own
business, to buy a small working farm, or to move
to a house built from unusual materials, and you
could be stuck. It is a rare week in which we are
not approached by at least one client needing to
extricate him or herself from a fixed deal –
and most of those cover just five years.
So, in this era of change, tread carefully if tempted
by a long term deal, and bear in mind that you may
have a viable alternative. It is possible to buy
a ‘cap’ from a financial institution –
an insurance policy against higher rates –
which, in return for a premium, will pay you every
month should your mortgage interest payments rise
above the agreed level. The way in which the charges
are calculated means that this option tends to be
viable mainly for larger loans but, within that
constraint, it does mean that you can choose whichever
mortgage is best for you, and still have the security
of long-term interest rate protection.
JSS
Private Finance was launched at the beginning
of 2006 to cater to the mortgage needs of Jackson-Stops
& Staff clients across the country. Its brokers
can be contacted via any of our offices or on 0870
6001650.
Above: Grade I Cheshire mansion,
113 acres, £6.5 million guide
Left: West Sussex farm, 103 acres, excess
£2 million guide |
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