farmland Rural

Farmland market levelling out, despite year of political and economic turmoil

Q3 2017

The value of farmland in England appears to be levelling out after two years of gradual decline.

Michael Fiddes

Head of Estates & Farm Agency

+44 1223 459505

Michael Fiddes, Head of Estates & Farm Agency for Strutt & Parker, said: “The past six months have been a time of unprecedented political and economic uncertainty, thanks to the Brexit vote and a snap general election. However, despite the turmoil, land prices have held up remarkably well.

“Since its peak in 2015, the average price of English arable land has fallen back, mostly as a result of continued pressure on farm incomes. However, the most recent analysis of our Farmland Database suggests that land prices have started to stabilise.

“The average price paid for arable land in Q2 was £8,400/acre – around the same level as seen during the first three months of the year. There can be a wide range in prices paid, but the majority of land sold in the £8,000–£10,000/acre price bracket, with most of this at the lower end of the range.

“Pasture prices also remained stable at an average sale price of £7,700/acre, with a range from £5,800 to £8,875/acre.”

Mr Fiddes said demand for farmland remains highly localised with some farms going under offer quickly following competitive bidding, while others are attracting much lower levels of interest.

“Farms are generally taking longer to sell, particularly the smaller units of 100-500 acres, but some of the larger blocks of ground are selling particularly quickly and selling well. One factor is more activity in the market from buyers looking to roll-over windfall funds from the sale of residential development land.

“Lifestyle buyers and private investors are playing an increasing role in the market.”

The data points to a significant fall this year in the proportion of land selling for more than £10,000/acre, compared with 2014 and 2015.

Mr Fiddes said while it is true that most farmers are less willing to pay a premium to secure land, another factor was a smaller number of properties exchanging hands which were likely to attract a premium.

“In Q1 of 2017 we saw three exceptional sales achieve prices of about £15,000/acre and while that has not been repeated in the second quarter, it is, to an extent, a reflection of the type of property that has been in the market over the past six months.

“Non-farmers may still be prepared to pay a premium for the right property – particularly in the ever-popular areas west of London and up into the west Midlands.”

Mr Fiddes said the year started slowly in terms of supply, however, more land has come to the market in Q2 and levels are around the five-year average.

“At this point, there are no indications that more farmers are planning to sell this autumn, which would accelerate the amount of land coming onto the market,” he said.

“While Brexit has caused uncertainty, some farmers have been reassured by the promise that subsidies will continue until at least 2022 and the rise in commodity prices, which is a direct result of the fall in the value of sterling.”

Regional outlook

“More than 8,500 acres have been launched on the market in the East of England over the past six months, which is just under half of the total acreage that came to the market in the region in 2016. Farms with strong interest from a local buyer, good accessibility and appealing characteristics are achieving the highest values, but prices continue to fluctuate widely with the central range tending to be between £7,500/acre to £9,500/acre.” Giles Allen, East of England region

“We have seen a number of buyers with funds to spend as a result of selling development land, but they are understandably looking for farms near to their existing holdings and there is a shortage of land in the right places. There are some 200-300 acre blocks that are struggling to sell, because they just aren’t in the right location. For a farm to achieve £9,000/acre or more it needs to be close to the right person.” Sam Holt, East Midlands Region.

“The difference between the highest and lowest prices paid for land has never been so wide. The best land, characterised by its location and quality, is selling very quickly and well. However, demand has fallen for secondary quality land, in less sought-after areas, or for farms where there is property that needs work. I expect the market to be selective over the coming months, with some blocks of land and farms struggling to find buyers, but don’t be surprised to hear of some top prices being paid for the most attractive properties.” Will Parry, Northern region

“Only a small amount of land came to the market in the south west during the second quarter of the year and there is a shortage of commercial arable farms available. We are also seeing a continuation of the trend for people to market their farms privately. Location remains the key driver of price and has resulted in a two-tier market. Arable ground is currently ranging from £6,500/acre to more than £12,000/acre, while pasture is selling for £5,500- £9,000/acre.” Charlie Evans, South West region

“Residential farms have strengthened in popularity, partly due to limited supply and partly because of an unexpectedly high level of buyer activity post-election. For larger, well-equipped commercial farms, there is rollover money to be spent (often from buyers outside the region). However, overall supply and demand are finely balanced, with a range of factors playing a big part in the prices bid. Finally, interest in land for vineyards continues to grow, particularly if the land is suitable for sparkling wine grape varieties.” Mark McAndrew, South East region

“The supply of land seems to be catching up with demand. Farmers choosing to retire has brought about half a dozen small- to medium-sized farms and bare land blocks to the market in recent months, mainly in Oxfordshire and Gloucestershire. The best-located farms are still selling well if realistically-priced, with demand particularly strong for 250-400 acre blocks with good access and the potential for diversified income away from mainstream farming.” Matthew Sudlow, West Midlands and Central Region