Saturday, August 24, 2019

Farmland values edge up as supply remains flat

August 8, 2019 by  
Filed under Property

The average price of bare agricultural land has nudged back above £7,000/acre in England and Wales, according to the latest Knight Frank Farmland Index.

Values rose by 0.7% in the second quarter of the year to £7,030, reducing the decline over the past 12 months to just 2%. Prices have fallen 14% since the market peaked in third quarter of 2015 – but are still almost 50% higher than a decade ago.

A limited amount of land and farms for sale is slightly down on 2018. Continued demand from a range of buyers – including farm businesses, those with rollover relief and lifestyle purchasers – have combined to offset the lack of clarity around Brexit.

Innovative farmers

“Many forward-thinking and innovative farming businesses are looking beyond Brexit in terms of strategic planning,” says Knight Frank head of rural research Andrew Shirley.

Knight Frank’s Farmland Index tracks the average price of commercial agricultural land without any residential property or buildings. When combined with UK government statistics, it shows the performance of farmland since 1944.

Published quarterly, the index is based on the opinions of Knight Frank’s expert valuers and negotiators. They take into account local market knowledge, client and industry sentiment and the results of actual sales conducted by both the firm and its competitors.

Although Brexit and uncertainty over the UK’s wider political future can sometimes leave potential buyers sitting on the fence, the majority of farms launched by Knight Frank this year are attracting good levels of interest.

Interested parties

An offer from one interested party can often be the catalyst for others to make a move, says Mr Shirley. Competitive bidding meant the guide price was exceeded recently on one good-sized farm in south-west England, he adds.

“The market remains unpredictable and polarised. Large blocks of quality agricultural land and out-and-out farms are attracting most interest due to their scarcity. When priced according to market conditions, these are selling well.”

Even so, it would be overly optimistic to claim that the jump in average prices seen in the second quarter of 2019 is the beginning of a more significant period of price growth, adds Mr Shirley.

Much will still depend on if and how Brexit is delivered later this year – and how the next government decides to target support for agriculture and the environment once the UK eventually leaves the European Union.