More than a sporting chance

09.11.18

Scottish sport estates are still remarkably stable investments even in an economically unsure Britain. Luke Thomas finds out what makes them so valuable.

Scotland's sporting estates are much sought after. Their stunning grounds give off a historic, almost mystical field that has attracted investors from all of the world for years.

Volume-wise, it’s a quiet sector – only a handful of properties exchange hands each year. But the properties have been found to be increasingly valuable and stable investments, even with the political uncertainty that the UK finds itself in.

The stability of the market comes down to scarcity of supply, according to Robert McCulloch, who heads Strutt & Parker’s Scottish estates and farms team.

"As an asset class, it’s a very niche market," Robert said. "There’s a global market audience for a product where only 20 trade hands each year," he said.

Generally, people are buying a Scottish estate as an additional home, not their sole place of residence, said Evelyn Channing director of Scottish rural sales, Savills.

"Therefore the market doesn't go up and down like residential property," Evelyn said. "Scarcity holds the values, and it’s not influenced by any particular degree from external factors."

When it comes to differentiating an estate from a simply large property, "There’s no set rule," said Tom Stewart-Moore, Knight Frank’s head of farms in Scotland.

"What else has it got? What other assets? Does the house look like an estate house or a farmhouse? Does it feel estate-like?" Tom said.

Size is unimportant according to Tom; "It’s just got to feel like an estate," he said.

Better than the rest (of the UK)

Prices of Scottish luxury country homes, including sporting estates, have risen by 2.1% in the third quarter of 2018 compared to the same period last year, according to a Knight Frank price index.

This is a modest increase, but a stark contrast to the rest of the UK where house prices have edged up by just 0.1%. The report notes that the rate of annual growth in the luxury country homes market in the rest of the UK has only risen by 1%.

"There have always been political factors that have caused concern as they have come along," Robert said. "But by and large, the market has continued relatively undeterred."

The Scottish referendum in 2014 is so far the only occurrence in recent history to negatively affect sales - only seven changed hands that year compared to the typical average of 20.

"That year, the majority, if not all, the buyers were foreign. From an international perspective, Scotland having a vote of independence was local politics," Evelyn said. "The Scots stood back, the English stood back, and the following year it went back to normal."

Catching investors hook, line and sinker

As to be expected the value of a Scottish sporting estate is really down to what sport it actually has to offer.

"When valuing, we break it down into components," Tom said. "If it’s 20,000 acres and it’s got an eight-bedroom house and 10 cottages, we value those houses based on comparable properties in the area."

Then, a price is put on the land and a value is assigned to the sport available on the property.

"If it's got red deer stalking, we look at how many stags they cull on the estate," Tom explained. "Typically someone might shoot 20 to 40 a year, and the capital value per stag can run from £25,000 to £50,000."

Keeping a sporting record book is also a great way to keep value in a property. It gives the estate a sense of esteem, and adds a spot of healthy competition for the new owners.

"In the big house, there'll be a lovely, big leather-bound record book," Evelyn said. "Some keep meticulous records: the size of the fish caught, the fly used, the pool."

Variety is the spice of life

An investment into any Scottish sport estate seems to be a stable one, but the best have a bit of everything on-site. Why have just a deer forest, when you can have a salmon lake and a grouse field too?

"The place that commands the most is an all-round estate that has a bit of everything," Robert said. "A bit of grouse shooting; some mixed game shooting: partridges, duck, that sort of thing; some deer stalking; and ideally some salmon and trout fishing."

"If you buy an estate that has that range of assets, the likelihood of capital uplift is highly likely."

"Estates that have forestry, or the potential for it, are commanding a premium and are getting interest from U.K. and abroad at the minute," Tom explains.

Demand and value for timber is soaring, and the Scottish government is dedicated to creating large amounts of woodland annually and managing existing woodland sustainably. Land owners would be foolish not to take advantage of the lucrative grants being offered by the government to support this regime.

"Forestry is the best investment of all," said Chris Hall, director of rural and professional services at Rettie & Co. Ltd. "Over the last 10 years, it’s more than doubled in value, and for the majority of investors, it’s a tax-free asset."

Investors can use forestry as a means to bypass a 40% tax on inheritance, and commercially managed woodland in Scotland qualifies for 100% relief from inheritance tax once held for two years, with income being exempt from both income and corporation tax.

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