Sunday, November 19, 2017

Non-farmers play bigger role in farmland market

August 2, 2016 by  
Filed under Property

Non-farming buyers are exerting more influence over the farmland market following the EU referendum. Purchasers are increasingly likely to include investors, high net worth individuals, overseas and lifestyle buyers.

Investors could find farmland more appealing in the face of wider economic uncertainty, say land agents Strutt & Parker. There are already signs that overseas buyers are taking advantage of a weakening in sterling.

High net worth individuals will continue to see land as an attractive investment with the value of farmland to them not directly related to its earning capacity, says Michael Fiddes,  Strutt & Parker’s head of estate and farm agency.

Safe haven

“We think it is likely that investors will have renewed interest in farmland, viewing it as a safe haven for wealth in uncertain economic times. It is early days, but we have already seen some signs of that happening.

“We are also getting calls from overseas buyers who recognise they will get more for their money as the exchange rate moves in their favour. We also know of farmers with rollover relief from development land who will still be seeking land in the right location for them.”

Uncertainty about future agricultural policy will make some farmer buyers reluctant to invest. But any drop in the value of sterling improves the UK’s competitive position, which could lead farmers to feel more positive about the outlook for agriculture.

Pressure

“In the short term, it is possible that we could see a decline in the number of transactions and average prices may come under pressure. However, we don‚‘t foresee a sharp drop in prices because there are other factors at play.”

Interestingly, no deals have fallen through in the days since the Brexit vote and people are still bidding on land on the market, says Mr Fiddes. But location, more than quality, remains the critical factor in what people are prepared to pay for land.

“Some of the difference is caused by land quality, but probably relates more to demand which can be very localised. Competition between buyers can mean that similar land can sell for very different prices, which makes market knowledge even more valuable than usual.”

The amount of farmland for sale is lower in most regions apart from in Yorkshire and the Humber, the West Midlands and the East of England, which is also the region with most land for sale.

The average value of arable farmland in England so far during 2016 is £9,700/acre, but the lowest price paid is £7,250/acre and the highest more than double this at £14,750.

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