Andrew Tuffin, head of Farm Agency at Symonds & Sampson, provides an insight into factors affecting the current farmland market.
Supply Less than 100,000 acres had been advertised for sale in Farmers Weekly at the time of writing, a year on year decline of 40%. This is the lowest amount since 2004, the year before single farm payment was introduced. Political uncertainty and the expected but largely undetermined change to support payments is delaying decisions to market land more than it is affecting values.
The main reason for sale continues to be retirement followed by change in ownership policy and death. Forced sales through debt are currently relatively low in number.
Demand On a national scale tax breaks, low interest rates, rollover money and investor interest continue to provide the fundamental demand for farmland. Combined with low supply has meant the market has been more robust than many predicted.
On a global scale the increasing population is driving the requirement for food and energy production, often conflicting with environmental sustainability. These are competing uses of both productive land and marginal land which is becoming more relevant as technology advances. Britain is better placed than many drier areas of the world to continue with food and energy production in the long term. Our climate, established property laws, transport network and weaker pound will make UK farmland an attractive long-term proposition for investors and international buyers.
Buyers Commercial farmers now only account for approximately 50% of land buyers, whereas historically this has been around 60%. Weaker cereal and beef prices have not helped confidence but the largest deterrent is currently uncertainty about the future of subsidies and trade deals. I dare say I will be reporting the same in 12 months.
Corporate and individual investors are becoming more prominent. Attracted by long term capital growth and less volatility than other types of property and the stock market, many view farm land as a safer asset. The slight cooling of bare land values since their 2015 peak has created an opportunity for investors to make a reasonable return. This potentially opens doors to farmers to rent, contract farm or take grass keep to provide a return on capital or keep the land tidy.
Residential and lifestyle buyers can have a huge influence on value. With many still earning good bonuses, land and even whole farms in the right locations, often adjoining existing property or near good private schools, can achieve a substantial premium. Land quality is less important in these circumstances. For instance land with a view by its nature is often sloping pasture. In the right area it can achieve as much as arable land, in the wrong area and not even farmers want it.
Following an often lengthy planning process, proceeds from development land sales are filtering through to farmers and landowners who are seeking to rollover gains.
Investors and rollover buyers tend to seek larger parcels of arable land with a minimum of 200 acres and preferably over 500 acres. Such parcels tend to create the most interest, therefore it is important to market widely.
Conservation-minded buyers, usually individuals or charity/trust funds, sometimes express interest in marginal land, but the land often requires specific attributes, for example woodland, water or accessibility, to be of value.
Values Most farm land is achieving between £7,500 and £9,000 per acre excluding small blocks under 10 acres and woodland. However, the range of values is extremely large, achieving from £6,000 per acre to £15,000 per acre.
Nationally average values are fraction down year on year and around 15% below the peak in 2015. However values are 40% higher than 10 years ago and 250% higher than 20 years ago. Regionally we have not experienced quite the same fall since the 2015 peak. Demand for smaller parcels of land can be fierce with some exceptional priced being achieved.
Farms by their nature often have surplus farm buildings and we work closely with our planning and development colleagues to achieve Class Q consents and disposals. A premium is often achieved by attaching land to a plot and we are always pleased to advise.
The Future Continuing policy and support uncertainty together with healthy rents being received by retired farmers will continue to restrict supply. The net result will be less transactions and flat lining values in the short term.
If you are considering buying, selling or letting farms and land, please do contact Andrew on 01258 474268 or our Farm Agents across the region. Click here to see the farms and land we are currently offering.
Symonds & Sampson can also assist with Farm Finance
Photograph - Looke Farm, West Dorset, sold by Symonds & Sampson.