Tuesday, December 18, 2018

Land prices ease amid ongoing uncertainty

November 1, 2018 by  
Filed under Property

Farmland prices eased by almost 2% during the three months to October, according to the latest figures from Knight Frank.

The average value of bare agricultural land in England and Wales dipped by 1.8% in the third quarter of 2018, suggests the Knight Frank Farmland Index. The fall means prices have dropped by 4% during the past 12 months and now average £7,045/acre.

Brexit uncertainty and the political future of the UK mean buyers remain cautious and see no reason to rush into a purchase, said Knight Frank head of rural research Andrew Shirley. Good land is still attracting strong bids, but lower quality parcels are struggling to sell, he said.

The government’s keenly awaited “Agricultural Bill”, which received its second reading in the Hose of Commons last month – confirms that direct payments to English farmers will be phased out once the UK leaves the EU. But it will take until 2028 before they are reduced to zero.

‘No cliff edge’

The bill was somewhat short of detail and put more emphasis on the delivery of environmental benefits than profitable food production, said Mr Shirley. But at least farmers now know they are not facing a subsidy cliff edge and have time to plan for life without direct payments.

Even so, while this means there is unlikely to be a glut of land for sale, it does suggest that the current two-tier market will become more pronounced as buyers focus on land either able to deliver the highest profits or the biggest environmental benefits and payments.

Aside from future support payments, the UK’s trade relationship with the EU is a cause for concern as Brexit negotiators struggle to find common ground. Particularly concerning is the growing perception that a “no-deal” outcome has become more likely.

Other factors

“This could have serious implication for farming, in the short term at least,” says Mr Shirley. “It is of course worth noting, that a significant proportion of farm sales are not solely driven by farming factors.”

Rollover buyers are still extremely active – one recently paid £12,000/acre for land sold by Knight Frank in south-west England. UK land also looks relatively cheap by European standards, especially given the weakness of sterling.

The attractiveness of UK farmland could also be boosted because of its reputation as a long-term safehaven for wealth should the economic and political climate become more uncertain as the Brexit date of 29 March 2019 draws closer.

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