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A u t u m n / W i n t e r 2 0 1 4

A S P E C T SO F L A N D

LAND OFOPPORTUNITY

HOWANEWBREEDOFBUYER IS ADDINGTOTHEDEMANDFORTHIS SCARCERESOURCE

The new laws onwater and what

they mean for youSavills launchesits Family Office

ServicesWhat next forScotland’s rurallandowners?

The time is ripefor propertydevelopment

WATERCOURSES

FAMILYAFFAIRS

AFTERTHE VOTE

PLAN OFACTION

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PHILIP GREADY, HEAD OF SAVILLS RURAL

It can be difficult to knowhow a business is performing

because so much fluctuates fromone year to the next.

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04 FAMILY FORTUNESIntroducing Savills newFamily Office Services

DOES THE CAP FIT?How are farmers adjustingto the new CAP rules?

FARMERS’ MARKETWho are the new buyersof UK farmland?

A MOVE TO IMPROVENew proposals on theenergy efficiency of houses

MONEY GROWS IN TREESWhy forests are such agood investment

TALKING POINTWhat are the views on theproposed mansion tax?

IN NUMBERSA graphical look at storiesfrom the rural sector

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Running a farm orestate is very different fromother businesses. It can bedifficult to know how itis performing because somuch fluctuates – fromheating costs to rainfall –from one year to the nextand that’s before you’ve

navigated through the latestCAP reforms.

Meanwhile property hasbecome a political football,with all parties determined

to raise more revenuefrom this asset.

We tackle these and otherconundrums in this issuewhich I hope you find

informative. If you have anyquestions we’d be delighted

to hear from you.

WELCOME

Aspects of Land is published on behalf of Savills (UK) Ltd by Casella Productions. Allinformation correct at time of going to press. Cover image: Stephen Shepherd / GettyImages. All rights reserved. Articles may not be reproduced without written permission ofSavills (UK) Ltd. While every care is taken in compiling the content, neither the publisher norSavills (UK) Ltd assumes responsibility for effects arising from this publication. Investmentadvice: The information and opinions contained in this magazine do not constituteprofessional advice and should not be relied upon. Specific advice relating to your individualcircumstances should be obtained.

Philip Gready,Head of Savills Rural

020 7877 [email protected]

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C O N T E N T S

NEWS & VIEWSRural news, market updateand diary dates for 2015

REGIONAL SPOTLIGHTAn insight into the issuesand trends in your area

WATER WAYSThe new laws and how theymight affect your supply

THE BIG BUILDChanges in planning lawsmake it a good time to build

PUBLIC PLACESPrivate estates contributeto the local community

CHALLENGE YOURSELFWhy comparing your farm toothers is good for business

AFTER THE VOTEWhat next for Scotland’slandowners?

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N E W S A N D V I E W S

The number of animals stoleneach year is rising steeply, withsheep the main target of thieves

KEY STORIES FROM THE RURAL SECTOR

COST OF LIVESTOCK THEFTRISES BY 25 PER CENT

T he theft of livestock is becominga growing problem for the UK’sfarmers. In 2013, the cost of

livestock theft rose by 25 per cent, accordingto insurer NFUMutual.The worst affectedarea was Northern Ireland, but north westEngland and the North East also saw asteep rise in large-scale sheep rustling.“Livestock theft has been on the rise

for a number of years,” says Peter Garbutt,chief livestock adviser at the NationalFarmers Union (NFU). “The growing costof living and the higher value of meat areprobably the main drivers.”

Thieves generally target sheep whichare relatively easy to transport, rather thancattle which have the added complicationof being tagged for life.“These are professional operations with

hundreds of animals stolen at once,” saysPeter. “The police are very attuned to theproblem. We’re working with them toinstruct them in what to look for and whatto ask if they have their suspicions about aconsignment they have stopped.”It’s difficult to secure a field of sheep

– although some farmers have dyed theirflock to make them instantly recognisable– but Peter’s main advice is to checknumbers regularly, put padlocks on fieldgates and report anything amiss, especiallysuspicious vehicles travelling at night.

Savills will be attending many eventsacross the country in 2015, here aresome key dates:

6-8 JanuaryOxford Farming Conference, Oxfordwww.ofc.org.uk

21-22 JanuaryLAMMA, Alverton, Peterboroughwww.lammashow.co.uk

6-7 MayAll Energy, Glasgow, Scotlandwww.all-energy.co.uk

10-11 JuneCereals, Boothby Graffoe, Lincolnshirewww.cerealsevent.co.uk

31 July – 2 AugustCLA Game Fair, Harewood House, Leedswww.gamefair.co.uk

DIARY DATES

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Green Deal funding can help insulate houses

For the eleventh year, Savills issponsoring The Georgian Group’sArchitectural Awards.

The Georgian Group protects andpreserves Georgian buildings, monumentsand landscapes, and gives these awards toarchitectural projects completed withinthe last two years that further this aim.There are seven categories for awards,

ranging from Restoration of a GeorgianCountry House, to Re-use of a GeorgianBuilding and Restoration of a Georgian

Garden or Landscape. There are alsocategories that recognise new buildswhich are sympathetic to Georgian orclassical traditions.Past winners of the awards include Stowe

House and Landscape in Buckinghamshire(pictured above), the Theatre Royal onDrury Lane and Cockermouth ShopfrontHeritage Scheme in Cumbria.This year’s awards will be presented by

The Duke of Buccleuch and Queensberryat a ceremony in London on 11 December.

ArablePrices have fallensignificantly over the pastyear and are back to

the low levels recorded in 2008 and2009. Feed wheat prices are 30 percent lower than this time last yearand oilseed rape prices have fallen20 per cent. Some of the pressureon farm incomes has been alleviated,with above average yields and a goodquality harvest recorded for 2014.

DairyGlobal dairy prices havebeen in decline for most of2014 and are beginning to

impact on UK milk prices. Average milkprices in August were 3 per cent lowerthan the previous year and expected tofall further, but still 6 per cent above thelast peak in 2011. Lower feed prices offersome relief to costs.

BeefPrices are under pressureand have fallen around 12per cent during the past

year. Milk quotas end in April 2015 andthe impact on beef prices is unclearalthough short term supplies are likelyto be above last year’s position. In thelonger term, there is likely to be pressureon supplies.

SheepPrices are down 9 per centon mid-2013 prices but over70 per cent higher than the

trough at the end of 2007. Although alarger breeding flock and higher lambingrates are expected to increase supply into2015, a return to the high supply levelsprior to 2010 is unlikely.

PigsPig prices over the past yearhave decreased by around8 per cent although lower

feed and energy prices take somepressure off margins.

PoultryFarmgate poultry and eggprices have fallen by 9 percent and 4 per cent over

the past year respectively. Margins aresomewhat relieved by lower feed prices.

MARKET UPDATE

PRIZE-WINNING ARCHITECTURE

Energy Secretary Ed Davey hasannounced that the governmentis making another £100 million

available to help people cut their energy bills.The money will be offered as an extensionto the Green Deal Home ImprovementFund that closed in July this year.Householders can apply for funds to

fit new boilers, double glazing, or betterinsulation, and repayments are madethrough the property’s energy bill, so thatif you move on, it is the new bill payer whowill continue with the loan repayments.In the same speech, which was at the

Liberal Democrat’s party conference

in Glasgow, Davey also announced a10 year cut in council tax of at least £100a year to those houses which made energyefficiency improvements. As he put it,we’ll be “offering a double bill cut – apermanent cut in your energy bill, for a 10year cut in your council tax bill.”

GREEN DEALEXTENDED

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BELOW TheCotswolds isvery strong forprime estates

CentralEngland hasseen a lotof changein landuse, and arelease ofcapital

N E W S A N D V I E W S

The “rollover” buyer has become a strongfeature of the market again, says RichardBinning of Savills Rural

FOCUS ON CENTRAL ENGLAND

NEW BUILDS LEADTO NEW BUYERS

Although there is a strong demand, there is stilla restricted supply of farms, estates and landcoming to the market in this region, which

covers Herefordshire, Worcestershire, Oxfordshire,Northamptonshire, Berkshire, Warwickshire andGloucestershire.Despite this, Savills teams across the centre of England

sold more than 12,500 acres this year.And research showsthat the average price of land continued to increase by 11per cent, which has been largely in line with expectations.What has changed in this area though is the driver

for demand. During the recession, numerous privateindividuals bought land as an asset, seeking securityto weather the storm. However, there are now fewerof these buyers around, as investment opportunities

elsewhere have increased; such as the strong propertymarket in London, businesses needing capital orproperty development.Over the last year, Central England has seen a lot of

change in land use, and a corresponding release of capital.Significant residential and commercial developmentschemes are now a feature around most reasonable sizedtowns in the region.This has released some large capitalreceipts to landowners.Following such gains, many landowners have looked

to add more land to their holding while others havebought whole new estates, as a means of rolling overthe capital gain. These buyers have re-emerged in themarket only relatively recently.Generally, in terms of other hot spots, the Cotswolds

is still very strong for prime estates and the farm salesteams across the region continue to see strong interestfrom London buyers seeking residential farms in thispart of the country. The region’s biggest sale this yearwas the 3,800-acre, 32-property Down Ampney Estatenear Cirencester, which was part of the Co-operativeFarms Portfolio (see page 26).

Richard Binning, Savills Oxford, 01865 269 168,[email protected]

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Sophie Barrett, of Savills Rural, is partof the team that manages the EynshamPark Estate, near Witney. She recently

led a project to install a 60-acre, ground levelsolar development.“We are always keen to look at ways to

diversify the estate, spreading the financialrisk into different sectors,” she explains.“When we looked at the returns for the solardevelopment, as opposed to the returns on itas farmland, it made good financial sense.”The field that was chosen for the solar

development was contract farmed, so it wasrelatively straightforward to take it out ofproduction.The solar field lease commenced in

December 2013 and the site was up and

running in time to hit grant deadlines inMarch 2014.“We chose Solarcentury as installers as

they have a good record of getting sitesthrough planning,” says Sophie. “We did iton a landlord and tenant basis meaning therewas no upfront cost to the estate and the riskswere reduced.”The site produces 13.4MW of electricity

which goes straight into the National Grid.This powers around 4,000 homes a year, andsaves 175,000 tonnes of CO2.The site has since been sold on by

Solarcentury, but the tenant remainsresponsible for reinstating the land at theend of the 25-year lease.“In reality, however, the panels will still be

producing at the end of the term, so it maybe that the lease will be extended – planningpermitting,” says Sophie.

Sophie Barrett, Savills Oxford, 01865 269 162,[email protected]

SUN SHINES ONOXFORDSHIRE

Julia CaudwellSurveyor, [email protected]

DEVELOPING TREND

What’s the story?A number of private estatesare looking into setting up asregistered housing providers,allowing them to build affordablehouses on their land for localpeople. By getting planningpermission as rural exceptionsites, the estates can also includean element of market housing tohelp fund the affordable housing.

What are the gains?The move enables estates toboth rehouse some of their owntenants and provide facilitiesfor local residents, at the sametime releasing additional land fordevelopment.

How is Savills involved?Savills affordable housing hasbeen advising on the actions tomeet the Homes and CommunityAgency (HCA) requirements withthe assistance of Savills planningand urban design departments.

Paul Lindon, Savills Oxford, 01865269 152, [email protected]

NEW JOINERS

We arealways keento look atways todiversifythe estate,spreadingour financialrisk intodifferentsectors

Will TidyGraduate Surveyor,Rural [email protected]

OXFORD OFFICE

Freddie Braithwaite-ExleyGraduate Surveyor,Rural [email protected]

Carys JonesGraduate Surveyor,Rural [email protected]

Erica [email protected]

CHELTENHAM OFFICE

Benjie NesbittGraduate Surveyor,Rural [email protected]

BANBURY OFFICE

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I N T E R V I E W

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Extremes in weather conditions, which wereonce the preserve of less temperate climes, arenow all too familiar in the UK. Who couldforget last winter, when Britain was hit by 12winter storms in a month and the subsequent

flooding, such as on the Somerset Levels? Or 2012,when adry winter and a wet summer also produced severe floods?The government’s Committee on Climate Change

believes that more intense bursts of winter rainfall and apattern of droughts, is here to stay.“There can be no doubt that managing water as a

resource will become increasingly important not just tolandowners and producers but for the whole of society,”says Peter Bennett of Savills Agribusiness.The government has responded by legislating to improve

water management and reduce waste and environmentaldamage.TheWater Act 2014, passed inMay, has broughtabout a series of changes; another Act is planned toimplement major abstraction reforms. So, what are themain areas that will affect farmers and landowners?

Whether there’s too much or not enough, water managementis never simple. Make sure you know your water rightsfollowing the recently passed Water Act 2014

WAT E R M A N A G E M E N T

With regulations onabstraction licences set tochange, farmers will needto be sure that irrigationmakes financial sense

WATERWAYSReforms in abstraction licencesIrrigation licensing is facing its biggest overhaul for 50years with the reform of the abstraction regime. Theofficial process has only just begun and implementationis 10 years away, says Paul Hammett, NFU nationalwater resources specialist.“The government is committed –with itsWaterWhite

Paper – to introducing a reformed water abstractionmanagement system able to ‘promote resilient economicgrowth while protecting the environment’,” says Paul.“Since farmers and landowners own around two-thirdsof all abstraction licences in England and Wales (whileabstracting less than 1 per cent of water), we should bein a strong position to shape changes.”Peter says it was clear from the public consultation

earlier this year that a significant “fear of change factor”existed. In the consultation, Defra offered two options:“current system plus” or “water shares” (the detailsof which were still under discussion). The majority ofrespondents favoured the former.SH

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WAT E R M A N A G E M E N T

“What is likely to happen is that no new summerlicences will be granted in most rivers and, for thoselooking to renew unused licences in over-extracted rivers,they will have to prove their need,” says Peter. “Winterabstraction licences will also face a more stringentprocess; a typical licence today might read 500 litres persecond on the flow; one applied for in the future mightsay 1,200 litres per second,” says Peter.The Environment Agency has announced that new

“renewal”procedureswill apply toall time-limited licencesthat are due to expire in 2015 and beyond. Assessmentswill be made to ensure they comply with new regulationsand replacement licences may not be issued on the sameterms as the expired licence.“Devising solutions to water scarcity during dry

conditions and drought must be a key part of theabstraction reform process,” says Paul. “In particularwe believe that if the government is serious in itscommitment to equality amongst all users then itmust abolish ‘section 57 restrictions’ [whereby theEnvironment Agency can restrict licensed abstraction ifthere’s a drought, with little warning, just at the timewhen crops need irrigation the most].”

Selling your excess water to suppliersWhile the Water Act 2014 has little relevance forlandowners and farmers licensed to abstract their ownwater, those who are business customers of mainswater companies may prick up their ears. From 2017,businesses, charities and public sector customers willhave the freedom to switch supplier, and this may provean opportunity for some landowners in the years ahead.Clause 12 of theWater Act 2014 will allow alternative

suppliers, such as landowners with spare water, to inputwater into any part of the network in order to supplytheir own customers, other licensees or their ownpremises under a self-supply licence.Peter says that while this new provision is to be

welcomed, it is unlikely on its own to incentiviselandowners to build reservoirs.“Expecting someone to make a £1 million investment

in the hope that they might find someone willing to buythat water is unrealistic.There are very clear barriers toreservoir construction, including finance and planning.”There may be others though who benefit from the new

provisions.“Landowners who used to use water and have an

existing reservoir may have an opportunity. For example,there are growers in Essex who moved away from potatoproduction but still have reservoirs. Should trading beintroduced, this would allow these landowners to putwater into the river to be abstracted by water companiesdownstream,” says Peter, adding that this avenue mightalso see public sector bodies seeking out joint agreementson reservoirs with landowners.

For thosesuch aslarge-scalevegetablegrowers,added-valuecrops mayjustify theinvestmentin reservoirsfor winterstorage

ABOVE A gooddrainage systemcould storeflood waterfor future use

Sustainable abstraction of waterAlthough abstraction reforms are on-going, thegovernment is committed to tackling the issue ofsustainable abstraction now. Water minister DanRogerson, introducing the reform consultation, said thecurrent system did not “help abstractors to trade watereffectively [nor] provide an incentive for abstractors tomanage water efficiently”.Concerns over unsustainable abstractions have

prompted the Environment Agency to vary somelicences already. Powers in the Water Act 2003, allowfor certain licences to be changed without compensationpayments to prevent serious damage to the environment.Trevor Bishop, deputy director of water resources

at the Environment Agency, says many rivers andgroundwaters in England suffer because too muchwater is abstracted from them. However, he adds thatthe agency “recognises the importance of water securityto the agricultural sector and will take this into account


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LOOK AFTER YOUR WATER■ Ensure water and pesticideapplication is as efficient as possible.For example, trickle irrigation in droughtsituations can be advantageous forcertain crops.■ Take steps to improve the water-holding capacity of land; adequatehumus content of soil can increase thesoil’s capacity to withstand droughtconditions.■ Be clear on the value of water – thegeneral rule used to be that it wasworth £500 per acre, but that figure isnow closer to £2,000 per acre. Thisinfluences crop margin calculations, aswell as the capital value of land withwater storage capacity.

■ Ensure land management isdesigned to retain water; for example,tied ridges in potato land or wintercover crops to reduce run-off.■ Look closely at costings for added-value crops dependent on irrigation.Where abstraction will be severelylimited, it may mean moving away fromcertain crops.■ Work with neighbours or, whereappropriate, water companies to investin water storage facilities; SuDS mayoffer the opportunity to capture floodwaters, for example.■ Focus not just on water quantitybut quality; this will be key to closerpartnerships with water companies.

when deciding on the extent and time-scale for makingchanges to time limited licences”.Richard Reynolds, senior agronomy adviser at

Anglian Water, adds that the focus is also very much onwater quality. “We’re working much more closely withlandowners on the quality of water, whether it’s leavingtheir businesses, or being retained. It’s important theytake a broader view of issues such as metaldehyde [apesticide often found in water]; particularly if they’relooking to sell into the water supply.”Felix Carter of Savills Agribusiness warns that

landowners and producers must also be very clear aboutthe cost and value of water and the margins of cropsdependent upon it.“For those such as large-scale vegetable growers,added-

value crops may justify the investment in reservoirs forwinter storage. Summer abstraction licences from riverscan be 10 times the cost of winter-stored water; in thesesituations, co-operation with a neighbouring landownerto build a reservoir can be a viable option.”

Sustainable Drainage Systems (SuDS)The Water Act 2014 encourages the use of sustainabledrainage systems. Developers and landowners need towork with the sewerage undertaker on any new drainagesystem, to make sure it is SuDS compliant.“For landowners, SuDS offer an opportunity to work

with developers to capture floodwater for agriculturaluse,” says Felix, who adds that they may also be of valuefor landowners looking to enhance environmental valueby building SuDS that run off into a pond or wetland.

Peter Bennett, Savills Cambridge, 01223 347 221,[email protected] Carter, Savills Norwich, 01603 229 214, [email protected]

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Over the last 12 months, the market fordevelopment land has transformed.The recovery of the housing market,combined with government pressure toincrease housebuilding, means there are

now lucrative prospects for owners who can get planningpermission for their land.“The pressure is strong for new housing, but in many

instances local authorities are not delivering, or are waybehind on doing so,” says Peter Start of Savills Rural.“This doesn’t just drive a rising market for developmentland, it also provides opportunities to challenge localplans and promote land for residential development thatmight otherwise be considered premature.”Savills research shows that across the UK the value of

greenfield development land increased by 2 per cent inthe third quarter of 2014, bringing year-on-year rises to10.4 per cent – the highest rate of annual price growthfor three years. Landowners should be looking at theopportunities that are available to them to profit fromthis rise. But where should they start?Andy Redman of Savills Development recommends

assembling as much supporting information as possiblebefore promoting a site, but warns that the upfront costscan be significant. “Local authorities face a politicalbattle in earmarking any sites for development, so theywon’t take on any more than necessary,” he says. “Itis therefore key to establish at an early stage the trueopportunity that the land offers.”“The starting point should be establishing that a site

is suitable for development in the first place,” says Andy.“That means commissioning studies into essentialssuch as utilities, drainage, ecology, highways and

THE BIGWith a growing need for morehouses, the economy improvingand planning policy relaxing, nowcould be the perfect time to pursuedevelopment opportunities

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P R O P E R T Y D E V E L O P M E N T

services in order to demonstrate that the site will sustainresidential development.”On large schemes, these studies can cost hundreds

of thousands of pounds even before the applicationis submitted, so finding a partner to promote the sitemitigates the financial burden. One option is to enterinto an agreement with a promoter, who will managethe entire process in conjunction with the landowner inreturn for a percentage of the eventual sale price. Theadvantage of this arrangement is that the interests ofboth parties are aligned, since owner and promoter willwant to maximise returns.Alternatively, an option agreement gives a prospective

developer the right to buy the land at a predeterminedpercentage of market value. The landowner wouldtypically receive some money up front, along with acommitment from the developer to promote the land.Smaller schemes are likely to be cheaper and easier

to promote, especially since changes to permitteddevelopment rights came into force this year. Since Aprilit has been possible to convert agricultural buildingsin England to residential use without a planningapplication. The Local Planning Authority (LPA) stillneeds to be notified of the proposals, and must appraisethem before any conversion works can begin. If the LPA’s

GET THE TIMING RIGHT

In Lincolnshire, Revesby Estate at Moorby, near Horncastle has been grantedapproval for the conversion of a barn — the first approval by the local authorityunder the new permitted development rights. Owners Peter Wiggins-Davies andhis father Gavin sought permission to convert a single-storey brick barn into atwo-bedroom dwelling with kitchen, utility room, living room, office and store.

“We timed our plans to take advantage of the introduction of the newpermitted development rights in April,” says Peter. “We have saved not only thefees associated with a full planning application, plus the costs of structural andecological surveys and reports, but a great deal of time: plans were submitted inApril this year and approved in July.

“We are keen to support the housing needs of our local community, andthe new permitted development rights make it much easier to do that whileenhancing the estate as well,” he adds.

David Morris, Savills Lincoln, 01522 508 970, [email protected]

decision is not given within 56 days, it may be assumedthat approval is not necessary and works can commence.It is too early to assess the effect of these changes, but

in easing the process of conversion they should help toalleviate the urgent need for rural housing and open upopportunities for landowners. They will also save money:an application under permitted development incurs a feeof £80,compared with £385 for a full planning application.“Although these changes are encouraging, taking

advantage of them can be complex,” says David Henry ofSavills Planning. “Numerous restrictions apply, and someprior approval of details is needed. Also, carrying out aconversion under the new provision will remove youragricultural permitted development rights for erecting orextending buildings for the next 10 years; constructingany new agricultural buildings will therefore require fullplanning permission.”Whether the scheme is large or small, it is vital to have

a good understanding of the local property market. “Valuesvary significantly, even locally,” says David. “So for smallconversions, getting the sums right can be critical. Largerprojects can take years to come to fruition, so synchronizingplans with the ups and downs of the market is vital.”Peter Start advises that the best outcomes result from

proactive, timely and well planned promotional work.“The current strong market and positive outlook forthe next decade will provide many new opportunities,”he says. “Given the long lead-in to securing consents,now is a good time for landowners to be reviewing thedevelopment potential of their holdings.”

Peter Start, Savills Ipswich, 01473 234 810, [email protected] Redman, Savills Chelmsford, 01245 293 293,[email protected] Henry, Savills Cambridge, 01223 347 253, [email protected]

SEVEN YEARS LATERIn 2007, a consortium of landowners at Haverhill inSouth Suffolk, began promoting a 100-acre site on theedge of the town. Using the Local Plan process and amajor planning application, the scheme was for morethan 1,000 homes, a primary school and a new reliefroad to create a sustainable urban extension to the town.

The application was submitted in 2009, but theproject was badly affected by the recession, and acomplicated and protracted planning process. A Savillsteam including planning, development and projectmanagement expertise was brought in to revise theproposal and renegotiate terms with the developers. InJune this year, the application was granted. Two factorsworked together to revive the scheme: a returningmarket, and changes to the planning “package” ofobligations, which reduced its cost burden. The site isdue to come to market at the end of this year.

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From village halls to primary schools,many private estates supply localamenities for the community

PRIVATE ESTATE :PUBLIC PLACE

Most village halls have a noticeboardfor events going on there: Brownieand Cub gatherings, Pilates classes,exhibitions for local artists. Theyserve a huge cross-section of the local

community and a recent survey from Savills shows thatmany of these halls are provided by the local rural estate.“About 46 per cent of estates have a village hall,” says

Sophie Barrett of Savills Rural. “For many estates it’singrained that they should be at the heart of the localcommunity, but they also have to be commerciallyminded: if you supply good facilities, it makes an areamore desirable and your properties more rentable.”That’s not to say that all the village halls will be historic

ones. Sophie points out there are also cases where anestate will have contributed to a new village hall as part ofthe development plan for building new housing.As well as halls, estates also provide shops, pubs, schools

and sports fields. “Sports fields are very common, with over70 per cent of estates providing one,” says Sophie.“But you’dexpect that, as estates often own the land around villages.”Rents might be charged for these facilities but they vary.

With playing fields, it’s often a peppercorn rent, but wherethe estate needs to provide insurance and maintenance fora building, it might charge a more commercial rate to coverthese costs. One area that’s changing, however, is schools.“In many schools now, the rent comes out of the schoolbudget rather than the local authority budget,” Sophieexplains. “So there are estates that are not increasing theirrents in line with commercial premises to enable the schoolto have more to spend on local children’s education.”

Sophie Barrett, Savills Oxford, 01865 269 162, [email protected]

One estate that supplies a great deal of facilities for its local community is TheBedford Estates. Famous for its Abbey and Safari Park in Woburn, it also ownsa significant amount of property in the area. In Woburn village itself this includesabout 15 shops, the Village Store and a Post Office, as well as a car park, a coupleof restaurants and a hotel run by the Estate. While in neighbouring Bedfordshirevillages it provides premises for two local primary schools and supplies a numberof playing fields for the local sporting community.

THE BEDFORD ESTATES

Per cent of estates that owncommunity facilities

Source: Savills EstateBenchmarking Survey, 2014

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Sports field Village hall Pub Shop School

70%

25%

11%

46%

20%

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CHALLENGE YOURPERFORMANCEDiscover if the margins you’remaking are as good as theycould be, with Savills ArableBenchmarking Survey

A R A B L E F A R M I N G

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Whatsurprisedus wasthe rangeof labour,fuel andmachinerycosts

W e hear a lot about how margins arebeing squeezed more tightly thanever. For farmers who work withso many variables – commodityprices, unpredictable weather,

growing costs – this is certainly true. The Savills ArableBenchmarking Survey aims to help farmers achieve thebest margins possible.Piloted in 2012, the first full year of the survey is

based on 2013 harvest results. About 55 arable farmerscovering almost 45,000 acres between them took part.They supplied data on everything about their farm fromtheir land and soil type, what combinable crops theygrew, yields, fixed and variable costs, weed problems theyhad – in short a complete picture of their farm in blackand white.Savills took this data and collated it to produce a report

of graphs and tables that – anonymously – comparedeach individual farm with its peers.“The survey is a tool farmers can use to appraise their

business, monitor performance and improve on it,” saysRobert Scott of Savills Agribusiness.“To take a few hours to provide the data that’s needed

could be very productive for a farm,” adds RichardMorley also of Savills Agribusiness. “It’s completely freeof charge and creates a benchmark that farmers can useto take their business forward.”

Key results from the 2013 survey showed that as faras fixed costs were concerned, contract farming could

deliver significant efficiencies. Also for those growingwinter wheat and oilseed rape, the survey showed thatfixed costs swallowed a similar proportion of crop priceto variable costs.However, it was the variation in results that was a real

eye opener for Robert. “What surprised us most was therange of labour, fuel and machinery costs, from one farmto another,” he says.Even though most farms long ago rationalised labour

costs, the variation for fuel and machinery is a goodillustration of the value of benchmarking. “Because fueluse is related to cultivation methods, soil quality andtimeliness of operations, comparing your costs for thiswith other farms can make you stand back and look atyour operations,” says Richard. “Are you doing thingsefficiently? Why are your machinery repair costs somuch higher than other farms?”While the survey cannot provide answers, it can

encourage farmers to ask the right questions about theirbusiness. “Although plenty of farmers have a detailedunderstanding of their inputs and outputs, they don’toften get the chance to compare their business withother farmers,” says Robert. “Farmers don’t tend to sharethat data, but this survey gives them that opportunityand the chance to analyse their business, how thingswork and where they could make improvements.”

Robert Scott, Savills Chelmsford, 01245 293 242, [email protected] Morley, Savills Lincoln, 01522 508 982 [email protected]

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Created by Savills and FarmersWeekly in 2011, the VirtualFarm is a 2,050 acre arableoperation that exists only insidea computer’s hard drive. It has2,000 acres of cropping, 40acres of scattered woodlandand 10 acres of tracks andhard standing.

Lying on Grade 3 land andon clay, it has a moderate blackgrass problem and its rotation isfeed wheat, winter oilseed rapeand spring beans.

It was set up to identify thechallenges similar businessesface and help design strategiesto cope with them. The farm is atop 25 per cent arable producer,and although it’s modelledas an efficient, well-run familypartnership, it needs to balanceinvestment requirements.

This year two scenarios – a

rent increase and a sizeabledrainage scheme – had asignificant impact on theVirtual Farm’s profitability,which is benchmarked againstreal-life farms in the ArableBenchmarking Survey.

According to Richard Morleyof Savills Agribusiness, whohelps run the model: “Thedecisions we make on thevirtual farm stem from ourinvolvement with farms on theground. With the wet year of2012, drainage issues wereshown to be a big problemand with increasing land values,many farms are taking the viewthat it’s better to improve whatthey have rather than buymore land to try and get thatextra productivity needed tomake farming more viable inlean times.”

VIRTUAL LEARNING

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AFTERTHE VOTE

One ofthe majorunifyingfactors inthe ScottishParliament issupport forLand Reform

With the referendum inScotland now over, there areplenty of other proposals onthe horizon, especially forScottish landowners

The Scottish rural sector might be feelingbattle weary after the debate surroundingthe referendum on Scottish independence,however, there are still important issueslooming large. “It would be dangerous for

those with an interest in Scottish land and property tobe lulled in to the false sense that things are staying thesame following the ‘No’ vote,” says Jonathan Hensonof Savills Rural in Scotland. “The sector now needsto grasp the thistle in the form of the AgriculturalHoldings Review, Community Empowerment Bill andLand Reform, none of which were dependent on theoutcome of the referendum.”One of the major unifying factors in the Scottish

Parliament is support for Land Reform – an initiativewhich is concerned with the redistribution of landownership in Scotland.The Land Reform Review Group published its final

review in May. “This was far more radical than itsinterim report,” says Jonathan. “Many of its 62 proposalsmight be seen as a direct assault on private ownership.The phrases ‘common good’ and ‘public interest’ arementioned numerous times, including within the title ofthe report [The Land of Scotland and the Common Good].Although there is little in the way of explanation of whatthese might constitute in practice.”The Land Reform Review Group, which has wide

political support across all parties, recommends theestablishment of a single body that will oversee landownership and management in Scotland and createa register of who owns what land. “The objective ofachieving ‘better transparency’ is widely accepted acrossthe sector,” says Jonathan. “However, the report alsoinvestigates an indiscriminate range of other mattersincluding sporting rights and rates, compulsory purchaseof land and property, and residential lettings policy

and taxation. Although no evidence is offered of theeconomic improvements that would be delivered to ruralScotland as a result of these initiatives.”The emphasis on encouraging greater transparency in

the estates’ sector came in to sharper focus this summerwith the publication of the Community EmpowermentBill. At its heart the Bill has the aim of communityparticipation and enterprising development and will allowlocal groups to purchase abandoned or neglected land.Often, this will be land on the urban peripheries.While this is commendable in theory,some landowners

are concerned about the definition of “abandoned or

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TIMELINE FOR CHANGE When can Scotland’s landowners expect to hear about changes?

neglected” which is not defined within the Bill. Whileit might be relatively straightforward to assess this inurban areas, it might not be so apparent in the Scottishcountryside where land might have been set aside tosupport public enjoyment, to encourage biodiversity orbecause it is undergoing planning for rural housing or agreen energy scheme, for example.Kenneth Munn of Savills Estate Management in

Scotland says: “We have been working with our clientsto ensure their land is comprehensively mapped, so thatthey can easily demonstrate where land is owned andactively managed, for the avoidance of any doubt.” Healso says that the Bill is a reminder for all “to ensure theyare acting responsibly in their role as stewards of theScottish countryside; ensuring appropriate health andsafety notices are displayed, that the land is free fromcontamination, and that it generally looks cared for.”The Scottish rural landowner also needs to consider

the Agricultural Land Holdings Review, which seeksto develop a dynamic agricultural lettings sector. Thisincludes compulsory purchase powers to support Right-to-Buy where landlords are seen to be underperforming.Many key stakeholder groups, including Scottish Land& Estates, National Farmers Union Scotland and theRoyal Institution of Chartered Surveyors all agreethat there is a need to address the current shortageof let farmland in Scotland. They want to encourageinvestment by both landowners and tenant farmers, andto facilitate landlord and tenant disputes.“Scottish landowners have been quietly making a

positive contribution to rural society for generations,delivering a range of economic, environmental andsocial benefits,” says Sarah-Jane Laing of Scottish Land& Estates. “However, there is still some way to go beforeall politicians are assured that, as a sector, landownersare part of the solution. Landowners have a key rolein demonstrating the value that their hard working,and diversified estates are bringing to the wider ruralcommunities in which they are located.”

Jonathan Henson, Savills Perth, 01738 477 511, [email protected] Munn, Savills Glasgow, 0131 247 3728, [email protected]

Ministersdecide futurepolicy direction

for tenantfarming

AgriculturalHoldings Review,

final reportsubmitted toministers

CommunityEmpowermentBill, Stage 1

report

CommunityEmpowermentBill, debate



Legislativeprogrammefor LandReform Billwas notavailableat time ofgoing to press.

December 2014 January 2015 February March

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I N T E R V I E W

In August, Savills launched itsFamily Office Services. Meetits director, Rupert Phelps,who explains what it does

FAMILYFORTUNES

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What will Family Office Services provide? The offering is simple: we’llorchestrate all Savills key real estate capabilities that are relevant to the familyoffice sector (ultra-high-net-worth individuals and their advisers), as well asoffering them professional services including mediation, trust management,property tax advice, family governance and succession planning.

Is real estate an important asset for this sector?Our clients will be both firstgenerational entrepreneurial wealth, as well as multi-generational familieswho may already have a landed component to their assets. Either way, theseclients invariably decide to allocate significant assets to real estate, especiallyif they have a large sum of cash being realised from the sale of a business asset.So real estate is always important.

Are there other matters that arise when significant sums of cash are raisedin this way? Yes. This is the moment when it is crucial for families to haveestablished a framework for decision-making amongst family members. Idon’t claim that we’ll ever eradicate family disputes, but you can work toreduce their damage and to try and prepare against them happening. Theproblems often come when a business, or part of a business, is transitionedover to the successor generation. We work on making sure that everyoneinvolved is prepared for that time. By prepared I mean able to communicatewith each other, to make decisions together, to be interdependent andeducated in their responsibilities. That way when a transition occurs peopleare more ready to work together.

Do you have a background in this area? Yes, I’ve been working with familyoffices and their advisers for many years. Most recently I was the Directorof Family Office Services at the American firm BNY Mellon WealthManagement. And before that I worked in the same field at Merrill Lynch.I’ve also been on the board of a single Family Office of a media entrepreneur.

And what are the skills you need for this job? You have to show empathyand sensitivity when you’re dealing with family members. That’s how youbuild up strong relations and a rapport with your clients. We’ll listen towhat our clients want, and match it to what we have or, through a referralhub, introduce them to suitable external advisers. Many of our clients willhave made this money themselves and have no history of dealing with biginvestments or property purchases so we’ll make sure they feel fully informedand well advised by people they can trust every step of the way.

Why has Savills set up this division? In response to a clear need in thefamily office sector for a collaborative offering that unites our specialist skillsin real estate. We not only acknowledge that our clients need other experts,we actually help them to find them. We are also the only global real estateservices company to be accredited to the Society of Trust and EstatePractitioners (STEP).

Who are yourmain competitors?This is not a one-stop shop that tries to pushclients towards proprietary products for a commission.We can offer our clientsreal expertise in property plus our experience in family governance combinedwith a fantastic network of other businesses that can be useful to them. Giventhis,we don’t really have any competitors at the moment. It’s exciting to be aheadof the crowd, but when you have the initiative, you have to run fast to keep it.

Rupert Phelps, Savills London, 020 7877 4748, [email protected]

523%Over the past 25 years, averageUK house prices increased by205%, while prices in primecentral London increasedby 523%.

270%Over the past decade, theaverage value of an acre ofUK farmland has increasedby 270%.

25%For those from Europe, Asia andthe Middle East, one-quarter oftheir wealth is held in real estate.

3%There are 200,000 ultra-high-net-worth individuals worldwide.They account for less than0.003% of the global populationyet hold 3% of world’s realestate, by value.

FACT FILE

You have to show empathyand sensitivity whenyou’re dealing with familymembers. That’s how youbuild up strong relationsand a rapport

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Now that Defra and the EU have releasedmore details of the CAP reformproposals, farmers can start lookingat what this means for them and theirfuture planning.

One reform in particular is causing all farmers to situp and take note. It is the introduction of “greening”requirements. From January next year, instead ofclaiming a farm subsidy under the Single PaymentScheme, farmers will now be claiming one under aBasic Payment Scheme (BPS). Under this new scheme,30 per cent of a farm’s direct payment will depend onmeeting compulsory environmental – or “greening”–requirements. This component has been designedto encourage biodiversity, and is an integral part ofthe justification for why agriculture should receivedirect funding. It includes crop diversification and theestablishment of Ecological Focus Areas (EFAs).“The detail of the reform has come late in the year,

which has caused some confusion for farmers in termsof land use for the 2015 crop year,” says Andrew Wraithof Savills Agribusiness. “The initial reaction is concernabout complying with the greening requirements with solittle time to plan for them.”

DOES THE CAP FIT?

For themost part,complyingwith the newrequirementsto maximisesupportpaymentsand avoidpenalties willbe relativelysimple

The long-awaited reforms to the Common Agricultural Policy havebeen decided. But are they helping or hindering farmers?

The requirements stipulate that farmers growingmore than 74.13 acres of arable crops have to plant aminimum of three crop types.The smallest area of whichmust be more than five per cent of the available land andthe largest no more than 75 per cent.In addition, at least five per cent of a farm’s total arable

land needs to be made over to Ecological Focus Areas.This applies to all farms of more than 37.07 acres ofarable land. A limited range of options that benefit theclimate and the environment are available to fulfil thisrequirement (see panel, right), with the farmer free tochoose the most suitable for their land. This does notnecessarily mean that land needs to be taken out ofproduction, since the options include growing nitrogenfixing crops such as peas and beans.“For the most part, complying with the new

requirements to maximise support payments and avoidpenalties will be relatively simple,” says Andrew. “Thereare exceptions where compliance will be more difficultdue to the nature of the cropping regime such as incontract farming operations and dairy farms.”Whilst at the outset penalties for non-compliance

with greening are expected to be relatively benign, overthe period of the new CAP it is expected that they will

F O O D P R O D U C T I O N

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become more aggressive. “So financially it is well worthgetting right,” says Andrew.There is a perceived inconsistency with the reforms,

in that having being exhorted to produce more to feed agrowing global population, farmers are now being askedto increase the level of unproductive land. So will the newscheme cause a drop in production? “It is unlikely,” saysAndrew. “Farmers are likely to use currently unproductiveland or utilise allowable cropping options for their greeningrequirements.” He sees a greater impact to productioncoming from black grass and herbicide resistance. “Farmersneed to consider cropping options and rotations to dealwith this, irrespective of the CAP reforms,”he says.Doug Jackson, also of Savills Agribusiness, agrees that

the changes won’t have a great affect on production, butbelieves they will bring challenges. “The reforms will createadditional bureaucracy,” he says. “In most cases there aresolutions that will limit the impact on the farming business,but it is vital to understand the specific requirements ofeach option to identify the best fit for your system.”

Andrew Wraith, Savills Lincoln, 01522 508 973, [email protected] Jackson, Savills Haywards Heath, 01444 446 021,[email protected]

WHATCOUNTS?

Farmers canchoose whichareas or featuresthey’ll use to makeup their EFA.They canchoose from:■ Buffer stripsnext to, or leadingto a watercourse.■ Nitrogen fixingcrops, such asbeans or peas.■ Hedges that arenext to arable land.■ Fallow land thatis at least 2m wide.■ Catch crops andcover crops, suchas rye, vetch orlucerne.

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I N T E R V I E W

The buying and selling of UK farmland is getting ever more sophisticatedwith corporate buyers, wealthy investors and even the sale of wholefarming businesses. What does this mean for farm owners?

L A N D VA L U E S

FARMERS’MARKET

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F armland in the UK has always been ownedby a variety of individuals, companies andinstitutions, who have many differentmotives for ownership. From time to time,and usually when the economy’s not doing

so well, new purchasers join the old vanguard.In the 1980s, for example, when inflation and interest

rates were high and other more traditional asset classesweren’t performing well, a number of pension funds andcharities invested in UK farmland. Although incomereturns in agriculture were small, the capital growth provedattractive to advisers looking to diversify their portfolios.

More recently the recession and the pressureson global food production have played their part inencouraging newcomers into the market place. Therehave been some eyewatering prices paid for well located1,000 acre blocks of good commercial land, where avariety of prospective buyers have turned the situationinto something akin to an auction room.“The farmland market has certainly become more

sophisticated,” says Alex Lawson of Savills Farms andEstates. “The new breed of buyer we see today is oftenmuch more familiar with complex transactions and thereis definitely a more global feel to the marketplace.”

Growing gaps in supplyBut it’s not only the prospective purchasers who arechanging. Savills recent UK FarmlandMarket in Minutesreveals that there is increasing polarisation betweendifferent regions in terms of farmland supply and values.In the first nine months of 2014, around 120,700 acresof land was publicly marketed, with significant regionalvariations. “While activity increased considerably in theEast of England where it was up by 58 per cent, and theSouth West, up 43 per cent, in the North of England,where the largest falls in supply were recorded, it wasdown by 34 per cent and in the South East by 9 percent,” notes Ian Bailey of Savills Rural Research.Land values were looking fairly polarised, too. At the

top end of the market, capital growth was strong. “Theaverage growth for prime arable land across Britainwas 12.8 per cent, which is more than four times thatrecorded for prime central London residential propertyat 3 per cent,” says Ian.The highest sales have achievedwell in excess of £15,000 an acre.“The very best quality land has been doing incredibly

well, while poorer quality land is much more difficult tosell,” observes Alex. “Arable land has a broader appeal,and that has certainly driven prices up. There are alsocertain regions which generally tend to hold their valuemore effectively.”

Can you benefit?Although there is little landowners can do to change thegeology or geography of their land, simple aesthetic

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L A N D VA L U E S

improvements are worthwhile to keep farms and estatesat the upper end of the price band. It definitely pays tomaintain drainage, hedgerows, woodland management,and infrastructure.“All of that helps,” says Alex. “Particularly as the

residential and amenity market is likely to take a turnfor the better.That’s where the next element of growthwill come from. As prospective purchasers continueto look for country houses, property demand andvalues will be influenced both by the farmlandmarket and the residential market. That’s whereenhancing infrastructure and aesthetic appearance doesmake a difference.”Figures for farmland transactions show that

corporate and institutional landowners are, at themoment, more interested in buying than selling. Cashstill features in around 80 per cent of deals, whichsuggests that demand for farms and estates is wealth-driven. Consequently, the reduced purchasing activity

by farmers may be partly down to weaker sentiment butalso strong competition from investors.“Moving into 2015, there are a few factors that

might increase supply and affect ongoing growthin values. Clearly an understanding of local marketconditions will be critical to buyer and seller to ensureexpectations are realistic.”On the whole, however, the outlook appears to be

a positive one. “The large deals we have been involvedwith, including the sale of the Co-operative FarmsPortfolio, demonstrate that there’s still huge varietyin appetite for the UK farmland sector – with interestcoming from all over the world, and from very differenttypes of buyers,” says Alex. “We are talking to a hugenumber of potential purchasers who, previously, wewould never have come across. ”

Alex Lawson, Savills London, 020 7409 8882, [email protected] Bailey, Savills London, 01797 230 156, [email protected]

Althoughthere is littlelandownerscan do tochange thegeology orgeographyof theirland, simpleaestheticchanges areworthwhile

LEFTProspectivepurchaserscontinueto look forcountry houses

Capital growth compared (Jan-Sept 2014)

12.8%3%

Primearable land

CentralLondonresidentialproperty

Supply by farm type (Jan-Sept 2014)

Arable 35%Mixed 32%Stock 24%Dairy 4%Unknown 4%Other 1%

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Demand for farmland, debt vs cash

100%

80%

60%

40%

20%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

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R E N T E D P R O P E R T Y

T wonewproposals thatare being consideredon energy efficiencywithin the domesticprivate rented sector

could mean significant changesfor landlords from 2015. Althoughmuch could evolve on the journeyto legislation, there is still plenty offood for thought.Already energy efficiency is

starting to grow in importancewith tenants. “It can directly affectthe rent that can be obtained,”says Alice Hayter of Savills Rural.“Tenants want to know more aboutrunning costs and they’re lookingvery closely at energy efficiency.”The first of the two

proposed legislations, the Tenant’sEnergy Efficiency ImprovementRegulations, would be in force by1 April 2016 and would allowtenants to request energy efficiencyimprovements from their landlord.Guy Clatworthy of Savills

Energy recommends that landlordsanticipate which properties mightgenerate these types of requestsand plan, in advance, how the workmight be done in a cost-effectiveand timely manner. “If you decideto make these improvementsyourself, there are tax benefits to behad, and you can define the scopeof the work,” he says. “Alternativelyyou could apply for Green Dealfunding,” (see right for more).“Good estate managers set aside

funds for property repairs eachyear which could also incorporateenergy efficiency improvements,”adds Alice.The second piece of legislation,

the Minimum Energy EfficiencyStandard Regulations, will requireall eligible properties in the

domestic private rented sector to beimproved to a specified minimumstandard – an Energy PerformanceCertificate (EPC) rating of “E”– by1 April 2018.The government estimates that

one in 10 privately rented homeshas “F”or “G”EPC ratings, and onein five privately rented homes is infuel poverty. So, there’s no doubtthat change is needed.The questionis: should landlords act yet?Guy counsels caution. “Our

advice would be to do your researchfirst, understand what your rentedproperty portfolio contains, assessyour EPCs, then decide where togo next. In other words, consider anoutline strategy because we cannotbe certain what the final regulationswill state. At the moment,agricultural tenancies (where thehouse comes with the farm) areexcluded but the proposals clearlysay that exemptions and definitionscould change.So,farming propertiescould be next in line.”For some landlords, now could

be a good time to assess whetherit would be more financially viableto make the changes and continueto receive the rent, or to sell on theproperty and release some capital.“Landlords who bring their

properties up to standard couldpotentially get increased rent, andbe able to let their properties morequickly,” says Alice.Plus, Guy adds: “As energy prices

rise, the link between rental valueand energy efficiency will definitelybecome more significant.”

Guy Clatworthy, Savills Wimborne,01202 856 855, [email protected] Hayter, Savills Cheltenham,01242 548 016, [email protected]

If new government proposals on energy efficiencybecome law in 2015, private sector landlords couldfind themselves with requests for improvements

A MOVE TO IMPROVE

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How long would I have to respond to a tenant’srequest for energy efficiency regulations? Yourtenant should put their request in writing, and you wouldhave three months to either consent to the improvementsand any associated Green Deal finance, or provide areasonable refusal. You may also be able to provide acounter proposal.

What if my property is listed? Listed properties arecurrently exempt, but they cannot be ignored forever.

What if my property has a long-standing let? If aproperty has been let to the same tenant since beforeOctober 2008, it may not have an EPC. However, yourtenant could still make a request for improvements aslong as the property type is not exempt from the newregulations.

If a Green Deal is in place and my tenant moveson, who repays the loan? A Green Deal Finance Planis attached to the electricity meter and the costs arerepaid through instalments on the electricity bill. So ifthe building is sold or let to another occupier, then theobligation to repay moves to the new electricity bill payer.However, be aware that if the property was empty at anypoint, but some energy was still being used (e.g. heatingover winter), the bill payer would be the landlord.

ENERGY REGULATIONS :YOUR QUESTIONS ANSWERED

How energyefficient are yourrented properties?

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I N T E R V I E W

The forestry sector has changed markedlyin recent years – formerly an assetheld for its capital value, timber is nowemerging as a vibrant market in its ownright. Booming demand for biomass is

helping to underpin the global market, so how caninvestors maximise their returns?The five key considerations when investing in forestry

are: location, physical condition of the soil, species oftree; age of tree, and access. “If you can tick all of thoseboxes and are investing for 20 years or more, you willdo well,” says James Adamson, investment and businessdevelopment manager at Scottish Woodlands, whichworks closely with Savills advising clients in Scotlandand further afield.“By its very nature, forestry is a long-term investment;

you can go 30 years or more without any incomewhatsoever,”says James.But it is not just the cash generatedby timber sales that produces a return for landowners andinvestors it is the appreciation of land values.“In 2013 the average price of all forestry sold in the UK

was £7,000 per hectare,with the best fetching over £10,000per hectare and the worst £1,000. That compares to anaverage of £2,100 in 1998 and £4,000 in 2008, which iswhy people have made so much money.”

With a predicted shortfall in timbersupply, the rising price of forestryland and the growing business ofbiomass, it’s no surprise investorsare putting their money in forests

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Although capital growth may not continue at such highrates in the future, James reassures investors: “The futureof timber is fantastic – globally we are short of timber overthe next 25 years, which has got to be positive for prices.”In the UK, Sitka spruce makes up 56 per cent of

softwood reserves, and is mainly used for constructiontimber. Some is also processed into products such asMDF and plywood, with agricultural fencing and papereach accounting for 5 per cent of the harvested amount.“Wood fuel, which was nothing 10 years ago, now

comprises 12 per cent of the market,” says James.“The biomass sector has grown very rapidly, both on aprivate and industrial scale – the key point is this is notsubstitute demand, it is entirely new demand.”Globally, foresters select the most appropriate species

for their environment, with temperate climates best forconifers and tropical regions better for hardwoods. “Inthe UK, Sitka spruce grows on a 35-55 year rotation,as it loves our mild wet weather,” says James. NorthernEurope favours Scots pine and Norway spruce, withmore beech and cork oaks in southern Europe andTurkey. Further south again, and you get into theregions of teak and eucalyptus, before heading back

Over thepast 21years, UKforestry hasreturnedabout 8.5per centa year,includingcapitalgrowth

RIGHT A teakplantation inBelize mainlysupplies woodfor furniture andboat building

into conifers in the more temperate parts of theSouthern Hemisphere.There are plenty of investment opportunities, ranging

from private forestry buyers to large institutional investorsand funds. “Funds will accept stakes from £25,000upwards, while individual forests will change hands from£300,000 to over £1 million,” he adds. “The UK marketonly turns over about 12,000-13,000 hectares a year, soreally large institutional investors look elsewhere.”Mature markets typically offer greater investment

security, albeit usually at lower rates of return. Over thepast 21 years,UK forestry has returned about 8.5 per centa year, including capital growth, although when risingland values are excluded a realistic return is around 1 percent at current timber prices, which have been impactedby the economic downturn across the world.Most established markets in developed economies return

less than 7 per cent,with established markets in developingcountries at between 7 and 9 per cent. Emerging marketssuch as Eastern Europe and Central America carry greaterrisk but potential returns of 10 to 15 per cent, whilepioneering markets such as Russia, China, Indonesia andwest Africa offer the highest risk and returns.Anyone seeking to invest in forestry abroad should

ensure they understand the political situation andsecurity of their investment, warns Hugh Coghill, ofSavills Rural. Unstable governments and illegal loggingare of particular concern in some of the higher risk areas.One region that offers excellent returns without

exceptional risk is Sub-Saharan Africa, with eucalyptusand pine plantations in the Rift Valley growing rapidlyand providing considerable economies of scale. Treesplanted in 2010 should start producing income from2020 to 2035, with a forecast return on investment ofbetween 10 per cent and 19 per cent, before any capitaluplift in land.Investing in forestry or owning commercially managed

woodland is extremely tax efficient, as under currentrules, timber is generally not treated in income andcapital tax calculations. Woodland on agricultural land,such as shelter belts, can qualify for agricultural propertyrelief, and it is even possible to defer the inheritance taxvalue of growing timber on amenity woodland throughwoodland relief which holds the tax until the asset isrealised and funds released for settlement.Altogether, it seems, the future is in the trees.

IN FIGURES

■ Globally, about a third of theearth’s land surface is forested,including tropical rainforest andnatural woodland.■ Only 6.5 per cent is activelymanaged plantation forest.■ 65 per cent of industrial woodsupply is sourced from naturalforests, with 35 per cent frommanaged plantation forests.■ Europe is over 40 per cent forested.

■ The UK is one of the mostun-forested parts of the world, withwoodland covering only 12 per centof the nation (17 per cent in Scotland).■ Baltic States such as Finlandand Sweden are about two-thirdsforested.■ About three-quarters of UKforest is privately owned, with theremainder owned by the ForestryCommission.

Forestry is about income generation, withsingle species planted on a large scale toharvest in the future. Woodland, while stillpotentially producing an income, is lesscommercial, with amenity, sporting andconservation often as its primary goals

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IN PRACTICE

Managing forested land is allabout the planning. “Everycommercial forest now has a LongTerm Forest Plan that is approvedby the Forestry Commission,”says Tom Chetwynd who hasrecently joined Savills Aberdeen,but was previously managing an3,500 hectare estate in Moraywhich included 1,250 hectares ofcommercial forestry.

“This working plan gives fellingapproval for the next 10 years,and approval ‘in principle’ for afurther 10 years after that too,”he explains.

The estate which he managedgrew Scot’s pine and Sitkaspruce. The oldest trees wereplanted in the 1950s and theyoungest in 2000.

“Getting the investment rightat the outset is essential forgood forestry,” Tom says. “Thisincludes: selecting the rightspecies and transplant, preparingthe ground appropriately forthe soil conditions, protectingthe area from deer or otherherbivores, weeding wherenecessary and employing goodcrop protection for the first fiveyears of growth.” Once thetrees are in, a typical rotationis anything from 35 to 60 yearsdepending on the species.

When the trees are due tobe felled, the timber is normallyoffered for standing sale by tenderand the successful purchase, forexample a saw mill or a timbermerchant, is responsible for fellingand clearing the area.

“Timber prices range from £15to £35 a tonne depending on thespecies, demand and proximityto market and we expected toharvest between 200 to 400tonnes per hectare,” says Tom.

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A S K T H E E X P E R T S

It’s the tax that has dominated Party Conferenceseason. Labour and the Liberal Democrats want anew tax on homes worth over £2 million, while theConservatives don’t. So is it the right tax? Will it raisea significant enough amount to make a difference?Or are there other options that make more sense?Politicians and commentators have their say

TALKING POINT

MANSION TAXTHE THINK TANKDIRECTORTim KnoxCentre forPolicy Studies

It’s hard to think of atax which would raiseso little revenue yetcause such damage. Itssupporters say it wouldraise between £1 and£2 billion: in thecontext of spendingon the NHS (£113billion this year), thatis inconsequential.And yet it wouldseverely disrupt thehigher end of thehousing market, andlead to interminablelegal disputes overvaluations.Theproblem is thatproperty taxation is ina mess: business ratesare too high, the ‘slab’nature of stamp dutyis ridiculous, counciltax bands have notbeen revalued for 20years and 80 per centof local governmentmoney comes fromcentral government.Wholesale reformshould be inspirednot by cynicalpopulism but by areal understandingof the balancebetween central andlocal funding.”

THE LABOUR MPShabanaMahmoodMPShadow ExchequerSecretary

The revenue froma mansion tax willcontribute directly toa ‘Time to Care’ fundto make the NHS fitfor the 21st century.The fund will providean additional 20,000nurses and 8,000 GPsin the NHS by 2020.We’ve designed thetax to be fair, sensibleand proportionate.The£2 million thresholdwill rise yearly withhouse prices to stopmore properties beingdrawn in. Protectionswill exist for peoplewithout a high incomewho happen to live inan expensive property.There will also be asystem of bands, soproperties worth tensof millions make asignificantly biggercontribution thanthose just abovethe limit.”

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THE INCOMEEQUALITYCAMPAIGNERTim StaceyThe Equality Trust

A whole ton of rubbishhas been spoutedfrom all sides on theeffects of a propertytax. Not least thatit will hit not-that-well-off middle-classfamilies in London.One estimate saysthat the new mansiontax will hit 110,000households, 85,500 ofwhich are in London.It’s worth putting intocontext that there arealmost two millionhouseholds in London.If these numbers areaccurate then it wouldhit the wealthiest0.5 per cent nationallyand the wealthiest5 per cent in London.The average houseprice in London isclose to £430,000,a long way off the£2 million barrier forthe mansion tax.”

THE REAL ESTATE EXPERTLucian CookSavills

The case for a mansiontax is relatively weak,however popularit may be with theelectorate. High valuehousing already suffersa relatively high capitaltax burden and pre-existing tax loopholeshave been closedby targeted changesto the tax system.Inevitably there wouldbe calls for exemptionsfrom the asset rich,income poor, andthose owning heritageproperty, which arelikely to impinge onits revenue earningcapacity. It would becostly to administer,with the potential forsignificant disputearound valuation. Itcould also result in asignificant leakage ingovernment revenuesfrom stamp duty,inheritance tax andcapital gains taxgiven the potentialimpact on pricing.Given this, the policyfocus may shift toadjusting the counciltax system.That mightinvolve adding severaladditional bands at thetop end of the market.”

THE NEWSPAPERCOMMENTATORSimon JenkinsThe Guardian

Ed Balls is a long-standing apostle ofTreasury brutalism,who capped andabused the localproperty tax for solong that he nowwants a new one. Inthe mid-1980s Britishhouseholders paidvalue-related rateswhich, in the richerparts of London, couldrun to £10,000 a year.Adjusted for inflation,those rich rate-payerswould today bepaying from £6,000to perhaps £30,000a year. Yet they areactually paying counciltax of a mere £1,369.Westminster collectsmore in parkingrevenue than it does incouncil tax. A mansiontax revenue would betrivial, £1.7 billion onjust 74,000 houses,and not conceivablyworth the politicalhassle. If politiciansreally want a moreprogressive localproperty tax, thereis no problem.Theyshould use the onethey already have:council tax.”

THE LIBERAL DEMOCRATDanny Alexander MPTreasury Secretary

It’s an outrage that a£50 million propertycan currently pay thesame council tax asa £500,000 home.That’s why we willintroduce a new levyon the highest valueproperties – new bandson top of council tax.This new tax will befair, affordable, andwill generate fundsthat will help ournation to live withinits means.”

THE CONSERVATIVEBrandon Lewis MPHousingMinister

Ed Miliband’s planfor a new tax on thefamily home, wouldharm millions ofhardworking taxpayersand I am completelyopposed to it.The taxwould force pensionersto sell their homesor face a significanttax bill, and those arethe same pensionersthat already worryabout inheritancetax affecting theirfamilies. Even severalLabour MPs haveadmitted that theirnew tax would be thethin end of the wedgeand sooner or laterhomes worth muchless would be included.And because the policyis supported by theLiberal Democrats,the only way to avoida new tax on thefamily home is to voteConservative in nextyear’s election.”

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I N N U M B E R S

A numerical insight into stories from the rural sectorFACTS AND FIGURES

British Food and DrinkThe whole supply chain of the Britishfood and drink industry (includingfarmers, manufacturers, wholesalers,retailers and caterers) contributes 7 percent of the UK economy and employs3.5 million people.

Flying the nestThe British Trust forOrnithology’s latestbreeding bird survey,shows that:

Breeding beaversA pair of beaversliving wild on theriver Otter in Devongave birth to threekits this summer.

Saved by garlicA tree consultant has found that highconcentrations of garlic can be usedto treat tree disease. Over the last fouryears he has treated 60 horse chestnuttrees suffering badly with bleedingcanker, all of them were cured.

How much are we growing?The UK produced 53 per cent of its food supply in 2013.In the major food categories, UK farmers produced:

+58%East ofEngland

+43%SouthWest

-28%Scotland

-34%North ofEngland

-11%

EastMidlands

+7%

WestMidlands

-22%Wales

-9%SouthEast

Regional changein farmland forsale between2013 and 2014

House Martins are upin Scotland (125 percent since 1995) butdown in England (27per cent over thesame time).

House Sparrows arethriving in Wales, up 96per cent since 1995.

Wagtail species arein long-term declinein the UK, with yellowwagtail numbersdown 13 per centsince last year.

84%of meat and meat

preparationsupply

22%of fruit andvegetablesupply

85%of dairy productsand egg supply

49%of cereals and

cereal preparations(including rice)

3.5m

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SAVILLSRURAL

SERVICESSavills is deeply involved

in the rural economy at everylevel and offers a range

of services for landowners,farmers and rural businesses

IN ADDITION...Savills also provides a wide range of services across all property sectors globally. Visit savills.com

AGRIBUSINESSProviding a range ofspecialised managementskills and business advicefor integrated farmingand rural businesses.Contact: Andrew Wraith01522 508 [email protected]

BUILDING & PROJECTCONSULTANCYSpecialist advice acrossa range of projects, fromcountry house renovationand the adaptation offarm buildings throughto new-build projects.Contact: Simon Collett020 7409 [email protected]

CLIENT ACCOUNTINGProviding financialaccounting services directto clients and also toaccountants, bankers andother professionals.Contact: Mark Turnbull01202 856 [email protected]

COMPULSORY PURCHASE& COMPENSATIONTracking problems forlandowners, occupiersand acquiring authorities.Contact: Richard Asher020 3320 [email protected]

COUNTRY HOUSECONSULTANCYAdvice on a wide rangeof property issues, inmany different locations,from the relatively modestto the very grand.Contact: Philip Eddell01635 277 [email protected]

DEVELOPMENTAdvice for all aspectsof development, fromviability proposals to landassembly and equalisation.Contact: Richard Rees020 7016 [email protected]

DISPUTE RESOLUTIONHelp in dispute resolutionfor all aspects of property.Contact: Mike Townsend01392 455 [email protected]

ENERGYAdvice on all areas ofenergy generation, fromfeasibility reports anddevelopment finance toproject co-ordination.Contact: Tim Waterfield01202 856 [email protected]

ESTATE & FARM AGENCYMarketing the completerange, from single fieldsto the largest estates.Contact: Alex Lawson020 7409 [email protected]

ESTATE MANAGEMENT& CONSULTANCYIf it’s 50 or 50,000 acres,we help clients tooptimise their assets.Contact: Mark Egar01462 813 [email protected]

INFRASTRUCTURE PROJECTSReferencing andacquiring land rights byconsent and/or CPO forall infrastructure projects.Contact: Tim Waterfield01202 856 [email protected]

MAPPINGProduction andpresentation of estatedocuments, maps,GIS, data capture,aerial photography andtopographical surveys.Contact: Debbie Bolton01202 856 [email protected]

MINERALS & WASTEMANAGEMENTAdvice on mineralextraction and wastemanagement.Contact: Martin Ott01245 293 [email protected]

PLANNINGResolving and promotingrural planning issues.Contact: David Jackson01865 269 [email protected]

TAX & ESTATE PLANNINGTax-related valuationservices, including adviceon IHT, CGT and VAT.Contact: Clive Beer020 7877 [email protected]

TELECOMSSpecialist advice forclients dealing withtelecoms operators.Contact: DavidWilliamson-Jones01202 856 [email protected]

VALUATIONAccurate, cost-effectiveand confidential valuationadvice for all properties.Contact: Charlie Seligman01962 834 [email protected]

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