Pockets of strength in farmland market
– but prices a lottery • Land prices remain mostly resilient • Lifestyle buyers will pay premium • Local interest can have big impact
T
he decline in farmland val- ues slowed during 2017, with average values show-
ing a year-on-year fall of 2% com- pared with an 6% drop between 2015 and 2016.
Arable land prices averaged £9,300/acre in England during 2017, slightly below 2016’s av- erage of £9,500/acre, according to the Farmland Database – a price analysis by property and
land specialists Strutt & Parker. “Farmland prices proved re- markably resilient in 2017, de- fying those commentators who predicted sharp falls in the im- mediate aftermath of the referen- dum result,” said Strutt & Park- er’s head of national estates and farm agency Mark McAndrew (pictured left).
“While the uncertainty sur- rounding Brexit has taken some of the heat out of the market, the average value of arable land actu- ally climbed during the last two quarters of 2017. “However, we continue to see a wide range in prices paid – from a high of £16,500/acre for arable land to a low of £6,000/acre. The amount of land selling for more than £10,000/acre also dropped to less than a third in 2017, com- pared to nearly 50% three years ago.”
Lifestyle buyers
Tighter supplies had helped to support average values, said Mr McAndrew. But demand was re- ally driving the market, with the highest prices achieved in areas attracting inter- est from non-farmers buying for lifestyle, in-
vestment and tax reasons. “There are an increasing num- ber of farmers looking to roll-over development money into a land purchase which is driving com- petition.” Overall, the average annu- al price of arable land has fallen by about 8% since the very peak of the market in 2015. But the strength of local interest can have a dramatic impact on the price paid for very similar properties. In the short-term, Mr McAn- drew said he expected price paid for individual farms to re- main highly variable. But aver- age values were likely to remain broadly stable, assuming no ad- verse changes to the tax treat- ment of land or a ‘harder’ agricul- tural Brexit than expected.
Return to growth Strutt & Parker is forecasting there could be a return to growth in capital values over the medium term due to continued restrict- ed supply and increased demand from rollover buyers. Each December the business works with independent econom- ic consultants Volterra to produce forecasts for how farmland prices
REGIONAL OUTLOOK
“Last year saw a fall in the number of farms brought to the market in the East of England. This has helped to keep prices relatively stable, with arable values typically around £7,500 to £9,750/acre. While demand is more muted than it was at the peak of the
market, nearly 90% of the land marketed had found a buyer by the end of 2017. Expansion-minded farmers remain key players in the market, along with investors with rollover funds. The farms achieving the best prices are in the right location
for these buyers.” Giles Allen, East of England region
MARCH 2018 • ANGLIA FARMER 73
“
Farmers looking to roll-over development money is driving competition.”
might change over the next five years. The forecasts are based on Auto-Regressive Integrated Mov- ing Average (ARIMA) models of the market since 1997. “While farmer-demand weak- ened in 2016 and 2017, there are signs of it strengthening,” said Mr McAndrew. “There is strong de- mand from rollover buyers and some farmers are still interested in buying as farm incomes have been buoyed by higher commod- ity prices due to the weakening of Sterling.
“There is also some medi- um-term certainty around sup- port payments following Defra secretary Michael Gove’s recent announcement that area-based payments will continue in some form under the new British Agri- cultural Policy until around 2024. “Interest from lifestyle buyers will continue to boost demand in some areas.”
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