Looking Back at 2011

22nd December 2011
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It is that time of year when we would like to wish you all a very merry Christmas and a happy and prosperous New Year. It is also a time when we can look back over the past 12 months and reflect on how caravan parks have fared during what can best be described as ”interesting times” with the state of the economy in Europe and the Euro.

It is quite evident from our records that the holiday caravan park is proving to be fairly resilient to the recession with occupancy levels holding their own and caravan sales being on par with 2009. Demand for used static caravans has out-performed new caravans reflecting a down-turn in demand for higher end units. Occupancy levels on touring caravan parks have, in the main been good with some parks reporting higher levels of income and profit.

There has been some concern particularly with the banks that values have fallen. In our experience this is not strictly true. It is fair to say that we are not seeing “premiums” that were being achieved up until mid 2008 but in most cases the core values are being maintained and where profit levels are up so are the values.

Unfortunately the same cannot be said for Park Home Estates which have been directly challenged by the down-turn in the residential market and this has impacted on the values and current demand in this sector.

One thing that does stand out is that when we compare this year to the previous two years, there are no clear trends emerging. There has been a steady demand for touring parks and static holiday parks and park home estates although less so with the latter. The key throughout has been price and where a business has been correctly valued we have seen deals happen albeit that we have witnessed far longer delays in transactions completing and this is mainly down to raising finance and the far greater levels of due diligence that is being carried out not only by the banks but also by the legal profession.

Static Caravan Holiday Parks
Static Caravan Holiday Parks, as always, have proven to be the most sought after type of properties with the greater demand being for parks from 50 units upwards with good accounts. Demand for larger businesses in excess of 150 static caravans is still strong but there has been a lack of good stock in the market to match the demand.

Touring Parks
The demand for touring parks is still very noticeable however this market has also been thwarted by the inability of some would-be purchasers to secure finance from the banks. This market has typically been led by applicants who are new to this industry and with stricter rules on lending in place the majority of purchasers are simply unable to further their interest. These ‘Lifestyle’ properties have been adversely affected by the economic climate due in part also because of the nature of the business and perception of the uncertainty of the income stream which is affected by both the economy and the climate.

Park Home Estates
We have witnessed an increase in demand for Park Home Estates over the past 12 months which is encouraging and with values having taken a dip since the dizzy times when the market was at its peak, where deals are happening park owners expectations of values appear to have recognised this downturn. It is fair to assume that when sales bounce back so might values but not we suspect to where they were.

New Developments
It is fair to say that whilst demand for new developments is still strong, it is increasingly difficult for purchasers to secure finance in these scenarios given the lack of income to cover the debt and that has had a big knock-on effect on value. The combination of initial high costs of developing and setting up a business against deferred levels of income has been deemed by the banks as being too ‘high risk’ and as such there are very few banks that would consider lending to this type of property unless a purchaser has a large deposit and other established sources of income. How times have changed!

Park Valuations
In valuation terms there are three main aspects that are clearly forces to be reckoned with when we value caravan parks: 1] Location; 2] Quality and standard of the development and 3] Sustainability of trading profitability. Potential is obviously a factor to be taken into account but income and fair maintainable trade and profit are key. With these three variables in mind Fig 1 (below) illustrates the range of pitch values achieved in 2011. Whilst this is not definitive by any stretch of the imagination due to the very nature and style of the business carried on, it does give an indication of how parks have been performing over the past 12 months in simple terms.

With 2012 fast approaching and the London Olympics firmly fixed in most peoples’ diaries it is likely to be another unpredictable year. We will all be keeping a close eye on the economy as any further economic disturbances will only serve to exacerbate the banks’ views on lending which the country desperately needs to kick-start the economy again. With good level of demand for parks and with the industry stabilising after a turbulent period we are optimistic park sales will improve again and we can all get back to normality again.

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