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Lack of supply and ongoing uncertainty is continuing to shape the farmland market in England, say property specialists. Private sales on rise in variable farmland market

Lack of supply and ongoing uncertainty is continuing to shape the farmland market in England, say property specialists.

Just 46,000 acres of farmland have been launched on the open market in England so far this year, according to the  Strutt & Parker Farmland Database, which records the details of all blocks of publicly marketed farmland larger than 100 acres.

The figure is well below the five-year average. And with relatively little land expected to come forward in the latter part of the year, analysts says it is now inevitable that 2020 will see the lowest amount of land publicly marketed on record.

“In total, just 152 farms have been publicly marketed to date in 2020, which is 25% fewer than in 2019 and 23% fewer than the five-year average,” says Matthew Sudlow, head of Strutt & Parker’s estates and farm agency.

Reluctant sellers

“In our experience, some sellers are choosing to hold back from the market until we are past the worst of the Covid-19 crisis. However, others who had previously intended to sell on the open market, are choosing to market privately instead.

“We estimate that private sales are growing, currently accounting for as much as 35-40% of farms and estates changing hands. What is not clear is whether this year is a one-off because of Covid-19, or a sign of things to come in the future.”

Most farms marketed publicly are selling, says Mr Sudlow. But demand can be varied, depending on whether there is a local farmer-buyer or if the land has a broader appeal to investors or lifestyle buyers.

“There is good interest from investors, lifestyle and rollover buyers for farms launched in the buyer’s target area or close to where they may already have property. Farmers remain the predominant type of buyer, accounting for the greatest number of transactions.”

In 2020, these sales have typically involved farmers with rollover funds or large farming businesses which are in the market for farms and bare land that allows for expansion. But generally, excluding rollover money, there is a smaller pool of farmer-buyers.

Farmers needing to borrow to finance a purchase are taking a cautious line when it comes to bidding, conscious of the serviceability of any loans given that changes to markets and support payments are likely to impact on their profitability.

As a result, there continues to be a significant range in values between the top and bottom of the market, although average prices remain remarkably consistent.

The average price of arable land sold so far in 2020 is £9,500/acre (up 5% year-on-year), with the average pasture price at £7,200/acre (up 4% year-on-year).

About 30% of arable land sells for more than £10,000/ acre, 20% sells for less than £8,000/acre with the rest between £8,000-10,000/acre. But more land this year is selling in the highest price bands and less in the lower bands.

Tricky forecast

Mr Sudlow says a wide range of factors make the future even more difficult to forecast than usual, including the outcome of trade deal negotiations with the EU which is likely to have a major influence on farm profitability.

“There is a belief amongst farmers that more land will come to the market next year, with cashflow already under pressure after a disappointing harvest, and 2021 also marking the start of the Basic Payment farm support payment being phased out in England.

“But at the moment there is little firm evidence to suggest that people are actively preparing to sell, and with interest rates still low, any increase could prove to be more of a trickle than a flood.

“The outlook for the land market could also be dependent on whether the Chancellor announces changes to the capital tax regime at the next Budget in the spring.”