Bottom end freehold pubs in the north have seen the greatest drop in price across the sector in 2011, with average prices down 11.6% against a 1% rise in the south, according to Fleurets’ latest annual survey of pub prices. Meanwhile, inaction in the market for ‘quality’ freeholds continued this year, while there’s been a significant increase in activity in the leasehold sector. Average sale price for bottom end freeholds fell 3.2% nationally, Fleurets said. Simon Hall said the sharp decline in the north “may reflect a willingness by many operators to “conclude deals on problem sites at lower prices and an increase in low quality sites coming onto the market through administrators”, rather than prices “fundamentally falling”. The proportion of the pubs being sold for use outside the trade climbed again, to 54% from 50% in 2010 and 42% in 2009. Hall said the overall figure for the industry “may be slightly higher” as many pubcos have been dealing with off-market deals to the likes of convenience stores and care homes. For the year ahead, Hall predicted an increase in average sale prices in the north and south as better quality sites come on the market and the pressure to sell “quite so quickly” eases. Transaction value will remain high but at “slightly lower levels” than in previous years, Hall said, and the increased viability of properties coming to the market will reduce the percentage of sites being sold out of trade. Among other freeholds, those deemed operational and viable and sold with the benefit of accounts, average sales prices increased 27% to £545k, although Hall said volumes were small and the rise is “a reflection more about the quality of property being sold than the movement in prices”. “This is demonstrated by the increase in the average FMT [fair maintainable trade] of the properties sold increasing from £301,000 in 2010 to £412,000 in 2011 and the multiple of sale price to FMT falling from 1.43 to 1.32. “There has been little difference in the volume of activity on a north/south basis with a similar number of deals being completed. The difference in sale price and multiple has been influenced in the north by a couple of high value deals resulting in the average sale price increasing and the multiple of FMT falling. This is because in the majority of cases as FMT increases the multiple usually decreases.” Hall said a higher proportion of freeholds are being sold to private individuals. “This may reflect vendors acceptance of the market conditions and a willingness to move on with their plans regardless of the market.” He said it’s difficult to see any significant changes in the sector in the next 12 months. “Until there is greater stimulus in the economy, increases of value in the housing market and a greater willingness of Banks to lend money the freehouse market will remain relatively quiet.” Deals in the leasehold sector increased 400%, although it was from a very low base, with sales prices up 16% nationally to £48,583. There was a 2.5-fold rise in tied lease deals, while tied leases accounted for 75% of deals. Average sale prices increased to 14% of FMT (7% in the north, 17% in the south). Average FMT of leases sites sold was £334,850, or £372k in the north against £292k in the south Hall said: “The last year has seen a significant increase in activity in the market. The previous year assignments were few and far between and a high proportion of activity involved the under letting of failed high street units often at subsidised rental levels. The last 12 months however has seen a much higher assignment volume, with some notable deals at significant premiums, both for tied and free of tie leases.” He added: “We anticipate that the leasehold market in general will continue to be challenging, occasional significant deals will happen and the wider assignment market will continue to slowly improve, especially in the south.”