Wednesday, September 26, 2018

Farmland values rise – but market getting tougher

September 3, 2018 by  
Filed under Property

The farmland market in England is getting tougher – despite rising average values over the first half of 2018, according to land and property specialists Strutt & Parker.

“Average prices have been relatively stable over the past couple of years, but it’s important to acknowledge they only reflect the land which has sold, says Michael Fiddes, the firm’s head of estate and farm agency.

Also looking at what isn’t selling gives a true reflection of the market, says Mr Fiddes. “Our figures show that over a third of the farms marketed in 2017 either remain available or have been withdrawn and these farms are obviously not factored into average prices.

Market  polarised

“There are still farms selling incredibly well, but overall it is getting tougher. The market remains incredibly polarised with location and farm type, rather than quality, remaining the key drivers of the price achieved.

“Land is still achieving excellent prices in areas where there are tight supplies and where buyers are funding a purchase with money from outside of farming. However, in areas where farmer buyers dominate, prices can be lower.”

The price paid for arable land in England over the past six months ranges from £6,800 to £15,000/acre. And the proportion of farms being bought by buyers using capital made outside of farming is rising.

Mr Fiddes says: “That we are in this position is not unexpected, and it is one that is likely to continue until there is greater certainty about the impact of policy changes on the agricultural sector. Until then, we will be dealing with a market which is much like the weather – full of extremes.”

In East Anglia, large farms and estates are outperforming the rest of the market. They are selling faster and at a higher return than smaller parcels. This is due to a combination of a limited supply and strong demand from both commercial farmers and buyers with rollover funds.

“The price of smaller parcels of commercial farmland can be lower as they are attracting buyers solely focused on the levels of return achievable from farming that land,” says Giles Allen, of Strutt & Parker’s east of England region.

Private sales

As well as farmers, investors fall into three main categories: lifestyle buyers, individuals with rollover funds from the sale of development land or those looking for an asset with long-term capital growth. To most of these investors, location is key.

Nationally, the trend for farms to be sold off market or privately continues – accounting for 20-25% of the market. Demand appears to be strongest for cereal farms. But more than 40% of the dairy, mixed, residential farms and estates marketed last year remain available.

The Strutt & Parker Farmland Database shows supplies of land coming to the market remain tight, which will be helping to support prices. Less land was publicly marketed during the first half of 2018 than the equivalent period in 2016 and 2017.

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