Additionally I would add that it is not a depreciative asset and can be sold again at a later date, returning the money spent. Of course you have to deduct the counterfactual returns of investing that money, but my intuition is generally that owning land is a fine investment if it saves you from paying rent.
Agreed. And from perspective of the EA portfolio, the investment has some diversification benefits. YTD Oxford property prices are up +8% , whereas the rest of the EA portfolio (Meta/​Asana/​crypto) has dropped >50%.
side point on a pet peeve. Raw house price increases don’t account for the cost of improvements and renovations and the effect they might have on the value of property. eg Some houses might have gained in value because the owners added a bedroom
In the case of individuals, owning land is commonly better than renting for tax reasons (because you aren’t taxed on the counterfactual rent). Since EVF is a charity, it is tax exempt, so the same logic wouldn’t apply.
It is true of course that this isn’t a flat cost of £15m, but you have to take into account the cost of converting the property (to the extent that the conversions aren’t valuable to a prospective purchaser), the transaction costs (although these are lower than you might think because EVF should benefit from an SLDT exemption) and the maintenance costs (which will be large for a property of that character), in addition to the counterfactual income forgone.
Considered as an investment it suffers from the usual problem of property investment, which is that it’s very lumpy. The exposure is specifically this particular manor house in Oxfordshire, which makes it riskier than a balanced commercial property portfolio.
Additionally I would add that it is not a depreciative asset and can be sold again at a later date, returning the money spent. Of course you have to deduct the counterfactual returns of investing that money, but my intuition is generally that owning land is a fine investment if it saves you from paying rent.
Agreed. And from perspective of the EA portfolio, the investment has some diversification benefits. YTD Oxford property prices are up +8% , whereas the rest of the EA portfolio (Meta/​Asana/​crypto) has dropped >50%.
side point on a pet peeve. Raw house price increases don’t account for the cost of improvements and renovations and the effect they might have on the value of property. eg Some houses might have gained in value because the owners added a bedroom
Relevant.
Also I’m sure it’s said a million times in this thread but upkeep may be high for this property.
Hasn’t actually been said that much and is a really important point
In the case of individuals, owning land is commonly better than renting for tax reasons (because you aren’t taxed on the counterfactual rent). Since EVF is a charity, it is tax exempt, so the same logic wouldn’t apply.
It is true of course that this isn’t a flat cost of £15m, but you have to take into account the cost of converting the property (to the extent that the conversions aren’t valuable to a prospective purchaser), the transaction costs (although these are lower than you might think because EVF should benefit from an SLDT exemption) and the maintenance costs (which will be large for a property of that character), in addition to the counterfactual income forgone.
Considered as an investment it suffers from the usual problem of property investment, which is that it’s very lumpy. The exposure is specifically this particular manor house in Oxfordshire, which makes it riskier than a balanced commercial property portfolio.