It is our belief that the shortage of pubs available for sale in 2003, particularly freehold freehouses, will continue during 2004 - with the result that pub values will once again rise as demand exceeds supply.
We also expect that freeholds will continue to be much in demand from both independent and group purchasers. A recent Christie & Co survey showed that 57.5% of private buyers bought freehold pubs, with the remainder purchasing leasehold businesses. Our figures also show that 44% of private buyers were first-time buyers.
Although there have been two small increases in UK interest rates recently, and rates may continue to rise during 2004, we believe the UK's economy will remain benign, with comparatively low interest rates, inflation, and unemployment, along with positive GDP growth and still rising (albeit more slowly) residential house prices. This will provide the right economic environment for publicans to trade successfully, which may once again discourage many from selling their properties - even though demand is high and values are rising. This in turn will perpetuate the shortage of properties that led to a 6.2% rise in pub values in 2003, according to Christie & Co's price index.
Another key feature of the pub property market is the on-going sale of pubs for higher alternative use values, such as redevelopment into residential property. Although this will mean the loss of a number of pubs from the market, we believe that the market can sustain this decline given that newer pubs tend to be bigger than their predecessors and there are still plenty of pubs spread throughout the UK.
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"Our figures also show that 44% of private buyers were first-timers"