DIVERSIFICATION: PROSPERITY OR PAIN'
Although the topic is nothing new, many property owners are asking themselves the question of how to make more from their assets now than ever before. This is for a variety of reasons, which relate to the ever-changing make up of rural Britain. With the advent of an increased number of lifestyle buyers, the break up of large estates, the diminishing importance of agriculture, the rise in the value of property and changes in rural subsidy payments. These factors have all served to create an environment where property owners with valuable capital assets would like to see some additional income returned from their properties, however large or small.
The significant rises in property prices seen during the first part of the twenty-first century, together with escalating costs within the construction industry, have meant that traditional landowners have been able to cash in on this growth if they had disposable property assets, whilst at the same time leading to increasing numbers of smaller land and property owners in the countryside. However, what has not changed is that property is still in need of maintenance and repair and it is beyond the means of the majority of landowners – whether old or new – to maintain and restore buildings surplus to living or agricultural requirements, often at significant cost, without seeing a return from that investment. |
The pressure has been further increased by the decline in agricultural incomes, the volatility of world commodity prices and the decoupling of subsidy payments across Europe through the introduction of the Single Farm Payment System. A common scenario is that people are aiming to restructure their income to place less emphasis on agriculture, and many owners have surplus traditional or redundant buildings are in need of imminent and expensive repair. They are left with no option but to do something, but what? Diversify? |
Not necessarily. People often underestimate the value that traditional buildings, or indeed any buildings, add to a block of land or a house, provided they are kept wind and water tight. Ancillary accommodation or potential equestrian facilities can create a large amount of potential added value. However, there is a danger that in certain circumstances a diversification enterprise, whilst it can generate income, may ultimately damage the capital value of the asset, or group of assets, when considered as a whole.
If the decision is made to investigate the feasibility of a new venture, you should engage the services of a professional property consultant to work with you and act as a springboard. This relationship should be seen very much as a partnership, and as the owner and beneficiary of a proposed new venture you must be committed and fully focused on the outcome if it is ever to succeed.
A considerable time period should be set aside to appraise fully and, if feasible, to carry out the project, allowing good levels of contingency both in terms of time, costs and changing aspirations. The proposed venture must be fully researched in respect of the market, costs, constraints, conflicts with other property and other enterprises on site, the availability of grants, tax implications and exit strategy.
Once you have fully researched the market, identified a need and established that you have a marketable product in an accessible location, it is essential that you undertake a comprehensive number crunching exercise. The most important facet to any diversification project or new enterprise is that it must stack up financially and this exercise should incorporate some sensitivity analysis to reflect changing circumstances such as fluctuations in interest rates, income levels and completion dates. If the project does not work on paper, however much you would like it to succeed, it is extremely unlikely that it will be viable.
One such project we have undertaken near Leicester involved a courtyard of traditional brick farm buildings within the curtilage of a Grade II Listed house. Other constraints at the site included a Scheduled Ancient Monument, the ongoing arable farming activities and let commercial units and the client’s house.
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All this effort has created a fantastic development, which will provide an annual income in excess of £70,000 per annum, but at significant cost and has necessitated a long -term commitment by our client. Nevertheless, the project has served to safeguard the future of some outstanding buildings and stabilise our client’s income from market volatility, increasing the capital value of their asset to the benefit of all parties concerned, ensuring a long term income stream with the potential for expansion whilst retaining its setting in the rural environment.
- Ashby de la Zouch
- 01530 412821
- Banbury
- 01295 271 555
- Knutsford
- 01565 757970
- Market Harborough
- 01858 410 200
- Newark
- 01949 851815
- Southampton
- 02380 883150
- Stafford
- 01785 220 044
- Worcester
- 01905 453275
