Good manors

Compton Castle, Somerset, was the first big estate deal this year when it sold for £15m

The British country estate market might be struggling back to life after the downturn but it remains characterised by a shortage of stock and the price-sensitivity of buyers.

One agency suggests values of country estates fell up to 20 per cent during the depths of the recession in late 2008 and early 2009, with many properties lying unsold. Now agents report a 30 per cent fall in the number of estates on their books compared to last spring, with a 30 per cent rise in the number of purchasers. These figures suggest the recovery in this sector might be fragile and down to a temporary shortage of estates up for sale.

“Because there’s so much money in the country estate system, with individual transactions of £10m plus, it has taken longer to reach the bottom of the recession here than in other sectors,” explains Ed Sugden of buying agency Property Vision. “Even so, buyers are from a broader range of locations than ever before because sterling is so weak. About 50 per cent of my work is for overseas clients and 50 per cent for domestic but there are few absolutely perfect houses available for any of them.”

Most British country estate sales are discretionary, Sugden says, so sellers are reluctant to accept low offers at first as they can afford to wait. As a result, transactions can drag on for months or years. When buyers scent that a sale is “forced” and must happen quickly, however, offers tumble and vendors relent.

Kiddington Hall in Oxfordshire, for example, was marketed for £42m in September 2009 with 2,000 acres of land. It received many viewings but few offers as it was known the sale was required to fund an urgent divorce settlement. Eventually, agents acting for socialite Jemima Goldsmith secured it, with just 20 per cent of its land, for only £15m. The remaining 1,600 acres will now be sold separately.

“This sale probably marked the lowest point of the country estate market and the buyer has made a particularly good purchase. Since then, prices have already recovered a little,” explains Sugden, who specialises in purchasing estates within a 100-mile radius of London. He says that Kiddington Hall was one of only three transactions above £10m in this area over the past year.

Large individual country houses can be secured for £1m-£2.5m but those with 100 or more acres of land and often including individual farms tend to cost from £3m-£30m – or more. The higher the value, the more likely it is that transactions will be conducted by buying agents such as Property Vision, who work on behalf of individual clients to find appropriate homes and then bargain down the price without the property even going on the open market.

For that reason, hard market data is often difficult to come by and eventual sale prices are often substantially lower than initial asking prices. “There are another half-dozen estates [in south-east England] now on sale privately,” Sugden says, referring to those being shown to buying agents’ clients only and not being publicised through estate agencies. “Their sellers hope to find Russian oligarch buyers who would pay top prices but I believe they’re 20-30 per cent overvalued,” he says.

Numbers of purchasers from a few overseas locations have fallen away during the recession.

“Demand from Irish and Danish buyers for UK farms and estates has declined over the past 18 months, primarily due to financial problems in their own countries and a resulting reduction in the value of their domestic farmland,” says David Hebditch of estate agency Chesterton Humberts. A sharp rise in the price of agricultural land – now typically £6,000 an acre – has also deterred demand. But the still-weak pound is drawing other purchasers from around the world, especially those who want an estate for reasons of privacy, investment or status rather than agricultural use.

“The Russians are back,” says Mark Lawson of The Buying Solution. “We’re seeing Chinese and Indians in the Home Counties near London. An Australian bought Compton Castle [in Somerset, 150 miles west of the capital] for £15m in the first big estate deal this year.”

Other buying agents say clients from the Middle East, Scandinavia and the US are appearing, too, and for the first time since before the recession international buyers are beginning to stray outside the usual “one hour’s drive” radius of London. “There have certainly been a few foreign clients to perk up the south-west market, reports Gideon Sumption of Stacks’ buying agency in Devon. “Foreign buyers now realise that England isn’t huge and the exchange rate may offer a once-only opportunity to buy for such good value.”

He recently secured a 25 per cent reduction on an estate marketed initially for £22m in 2007 and says this is a typical result on any over-priced property that lingers on sale. “There’s a lot of price sensitivity and, thankfully, most sellers coming to the market today are steering clear of the stratospherically priced nonsense approach seen in 2007. Now, if a good, unblemished estate is sensibly priced it will sell relatively quickly because stock is so thin,” says Sumption.

The backgrounds of buyers might be changing, too. Estate agency Savills, which is building a database of this sector’s prices and transactions, says that about one third of the buyers of British estates it has marketed derive their wealth from retailing and industry. Another third come from finance while the rest have either family wealth or are in property or shipping.

Not every UK country estate, however, has purchasers clawing at the gate. About 400 miles north of London in Scotland, estates are in short supply but so too are buyers. This is one part of the UK where the principal houses on many estates have remained in the same family for generations, so they tend to come to the market in need of substantial modernisation.

There is “a reluctance to commit the expenditure involved in both the purchase and upgrading of the property and thereafter the commitment to the ongoing annual cost of ownership,” says Chris Hall, director of rural sales at Rettie & Co, an Edinburgh estate agency specialising in large rural properties.

Only five Scottish rural estates were put up for sale in 2009 and two have still to find buyers. Hall warns that in past recessions estate sales have dipped badly and until there is more sustained economic recovery this time around “demand for country estates in Scotland is likely to remain weak and unpredictable”.

Like many prime markets, the estates sector saw a lull in transactions in the lead-up to the general election. “A few buyers were deterred by the prospect of a mansion tax or higher stamp duty payments but these are minor deterrents. Estate buyers are significantly wealthy and a few tens of thousands of pounds make relatively little difference to them,” notes Sugden. He says the exchange rate favouring overseas buyers is much more influential. “The pound looks likely to remain weak for some time to come. That may well bring more international buyers to Britain and would be a substantial help to the market.”