London, 7 February 2014, The performance of a rural estate portfolio as an asset class was recorded at 7.8% in 2013. This impressive performance outpaced both the UK residential and commercial sectors and was attributed to the unabated growth in value of agricultural land.

National property consultancy Carter Jonas today launches its fourth performance review of the Model Estate, an annual report that analyses the return on investment of the various assets of a notional rural estate, and compares it to a basket of recognised asset classes. These include classic cars, fine wines, gold, equities, residential property and commercial property.

The theoretical property totals 3,208 acres, comprising a combination of in-hand and let farms. The estate also includes a residential and commercial portfolio, a telecoms mast and fishing rights. It is located within the geographical triangle bounded by the M4, M40 and M5 motorways and it is managed by Carter Jonas.

With a total return of 7.8 per cent in 2013, the Model Estate is ranked third of the seven asset classes reviewed, after classic cars (1) and equities (2).  This is two places up from 2012, when it was fifth (behind classic cars (1), equities (2), residential property (3) and gold (4)).

The Model Estate was valued at £32.9 million as at 31 December 2013, an 8.4% increase from its 2012 level (30.5m).

The rise in value was primarily boosted by a 15.4% increase in value of the let farms element of the estate during the year, although the value of the in-hand farms (excluding the manor house) also rose by an impressive 6.8%.  Both strong performances reflect the continuing success of agricultural land as an asset class, with values of prime agricultural land in the UK witnessing increases of between 7-10% to 2014.

Notably, the performance  of the Model Estate was further boosted when the manor house and commercial sectors were excluded, again illustrating the strong performance of the underlying agricultural land as an asset class.

The increase in the value of the agricultural land within the Model Estate is in line with the UK land market in general, with prime agricultural land values continuing to soar as demand continues unabated.

Catherine Penman, head of Research, Carter Jonas said: “Despite a slower rate of capital growth being witnessed over the last year, prime land values are predicted to continue to rise by circa 5% per annum over the next five years, therefore securing the future performance of the Model Estate over the medium term. Prices in the south east have already been outstripping the national average, with £10,000 an acre regularly paid in this region for arable.”

The residential element of the estate produced a total return of 3.0%, in contrast to the 0.4% return recorded in 2012. The improvement in return was entirely due to a rise in the capital value of the portfolio - a consequence of improving macroeconomic sentiment and security in the job market.

Penman said: “The Model Estate was the fourth best performing asset over a five year period (2008-2012) with a 5.3% return, underpinning its value as a favourable asset during a period of unfavourable economic outlook. Its improved performance this year is in line with wider economic improvement, although marginal in some cases, across the residential and commercial property sector.

As prospects look brighter, investors will no doubt continue to take advantage of the healthy price growth of the farmland market but may consider alternative asset classes with opportunities for better capital growth over the next five to 10 years

“The Model Estate will however remain a desirable investment due to the financial stability it delivers, and fiscal advantage it offers.”

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