Uncertainty is ‘stifling’ tenanted sector

• Farmland market faces period of change

• Flexibility can promote success

• Most lettings are still bare land

Changes in government policy are likely to impact the tenanted farm sector, with uncertainty typically leading to shorter-term lets, says a study.

The farm let sector remained stable in 2023, despite fears that owners would take land back in-hand for environmental uses, according to the 47th annual survey of let land in England and Wales by the Central Association of Agricultural Valuers.

Stifling effect

“The overall let area has remained static since 2003, when CAP area payments were starting to come in, says the study. But it suggests that could change now payments have been delinked from land – and are being phased out entirely.

“The let land market has appeared to have settled at an unnatural equilibrium, due in part to the stifling effect of area-based entitlements and subsidies,” says CAAV secretary and adviser Jeremy Moody.

“Whether de-linking changes this is a matter for future surveys. In all parts of the UK, the tenanted sector will only grow if owners who do not want to farm themselves see letting land as an attractive option.”

Bare land

Fresh lets in England and Wales were marginally outweighed by losses, according to the CAAV study. This resulted in a net loss of 1,532 acres of let land.

Some 68.6% of 1986 Agricultural Holdings Act tenancies were re-let on Farm Business Tenancies averaging 7.26 years.

Most lettings were of bare land – only 6.6% were fully equipped farms. And the average agreement length increased with area and equipment. Holdings with a house and buildings let for almost 10 years, while the overall average was 3.84 years.

“But this includes everything from seasonal grass lets upwards, so where lettings of a year or less are excluded, the average term was 5.42 years,” says Mr Moody.

New entrants obtained 20% of lettings where occupation changed. They tended to be longer tenancies – 35.6% over five years. Activity increased during 2023, though not to the levels seen before 2005.

Mr Moody says the CAAV is actively looking at ways to remedy the stasis in land occupation. “Increasing the use and flexibility of our land occupation markets seems a critical reform for the future commercial success of agriculture,” he says.

“In that task, the Republic of Ireland’s Income Tax relief for letting farmland for more than five years is showing strong and continuing signs of success in attracting retiring farmers to let out their land. That merits serious attention in the UK.”

The full report can be downloaded from www.caav.org.uk.