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by Barney Bettesworth
of chartered surveyor
and licensed property
agent Bettesworths |
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While pub and hotel prices may have peaked during the summer, there is no reason for gloom and doom. The UK economy is much stronger than it was in the late 1980s and early 1990s, with almost full employment, minimal inflation and - despite recent increases - still relatively low interest rates.
Leading lenders the Halifax and Nationwide have both recently said that the housing market's fundamentals remain sound and that, over the coming years, house prices are more likely to grow at a subdued rate rather than fall sharply. Both companies are preparing their predictions for the coming year and are expected to forecast low levels of growth during 2005.
The commercial market does, to some extent, follow the residential market, particularly where first-time entrants into the hotel and pub business depend on the sale of their home before being able to commit to the purchase of a business.
But underlying demand remains strong and there are still many would-be buyers for hotels and pubs, particularly in the West Country. In the past 12 months we have sold 135 hotels, pubs and catering businesses in this region, with 70% of the buyers coming from outside the area.
Lenders are keen for new business, and there are some very attractive packages and rates available, but with less inflation in the property market they are obviously also keen to ensure that the new business is a viable concern. Price is therefore a critical factor and, to effect a sale, sometimes purchasers' and vendors' aspirations have to be compromised.
As prices in the pub and hotel market have undoubtedly peaked, sellers will once again have to be prepared to consider realistic offers.
While Bettesworths does not foresee any great fall in values, would-be buyers will be looking very carefully at benefits of purchase, the accounts, and how much they are paying - particularly for "lifestyle" businesses where bottom-line financial returns do not alone justify the price.
To sum up, 2005 will not present a seller's market. Purchasers in a position to proceed without a dependent sale will be in a strong position, and will be looking for good value as an increasing number of businesses come on to the market.
barney@bettesworths.co.uk