West Country agent warns that time may be up for buying

The best time to buy a pub in the West Country may have passed according to Chris Grimshaw, director of agent Chesterton's Exeter office.

Prices for all types of leisure property in Devon and Cornwall are rising as a result of UK house price increases and recent months have seen interest in businesses in Devon and Cornwall reach new levels.

Buyers are willing to pay a higher price - and are prepared to take a lower return on their investment.

"Traditionally a pub is valued on a multiple of the net profit from the business," explained Mr Grimshaw. "This price reflects the return the purchaser expects from the capital he is putting into the business.

"Not since the mid-1980s has that multiplier moved upwards as fast as it is doing at the moment," he said. "Investors seem prepared to take lower returns on their investment, relying on continuing growth in the value of the property."

Six months ago Chesterton judged that it was probably the best time to buy leisure property, a prediction that is now proven to be correct, says Mr Grimshaw.

How long the inflation in leisure property prices will continue will probably depend on the residential house market which itself is dependent upon interest rate changes.

The South West market also reflects increased income, tourist spend and bookings over the past decade and shows the continuing impact of the Eden Project on bringing in more tourists and extending the trading period.

Christie & Co's Winchester and Exeter offices also report that the number of buyers from outside the region is on the rise, "a trend last visible in the property boom of the 1980s".

They include a number of London chefs who aim to convert poorly performing businesses into gastropubs. "By doing so they are often able to increase weekly sales from £2,000 a week to as much as £20,000," the company says.

Christie & Co's Manchester office also reports "exceptional levels of sales" in what is traditionally the slower part of the year. In the first five months of 2002 it sold 50 pubs with sales agreed on a further 33.

"The predictions are that if interest rates remain low, there is likely to be even more buyers entering the market," it concludes.