Friday, December 15, 2017

Farmland values harden as supply tightens

December 1, 2017 by  
Filed under Property

Farmland values show signs of firming on the back of tight supplies and strong interest from non-farmers and tax-driven buyers during the third quarter of 2017.

Analysis of Strutt & Parker’s Farmland Database shows that private investors and rollover buyers are emerging as the dominant force in the market for farmland in England, with farmers accounting for fewer transactions than at the peak of the market in 2015.

Transactions involving private investors have more than doubled from 8% before the 2008 financial crisis to 20% in 2017. Agents also report greater levels of activity from rollover buyers reinvesting the proceeds of residential and commercial land deals to avoid a Capital Gains Tax liability.

While many of these rollover buyers are farmers, they are funding their purchase from a development windfall, rather than from their core business, which allows them to pay premium prices for the right sort of farm.


Overall demand

Michael Fiddes, head of farm agency for Strutt & Parker, says: “Our data points to a combination of tight supplies and increased interest from non-farmers and tax-driven buyers, causing prices to firm for certain types of property, despite demand overall for farmland being weaker.”

Data shows more farmland is remaining unsold compared to two years ago, but much of the land which is selling is achieving good prices. The average price of arable farmland sold in Q3 of 2017 was £9,100/acre – which is nearly 5% higher than it was in Q2, says Mr Fiddes.

“This change may not be statistically significant because of the relatively small amount of land which sells in each quarter – and, of course, it only reflects the land which has sold – but it does feel anecdotally as if prices have firmed in the past quarter for larger farms.

Larger blocks

Some categories of buyers – including those looking for large residential estates – are competing over a dwindling pool of properties, says Mr Fiddes. Similarly, an increase in rollover money circulating in the market has prompted strong demand for larger, commercial blocks.

Mr Fiddes says since 2013 an average of 43% of farm sales had been to non-famer buyers, with these transactions accounting for 55% of the total area sold. Farmer-buyers accounted for less than half of land sold.

This year started slowly in terms of land marketed and it looked like the year would end that way too. During the first nine months of the year, around 73,000 acres of land in England were marketed, which is in line with the five-year average, but a 20% fall on 2015 levels.

“Autumn is usually a prime time to sell, but there has been a noticeable lack of new farms coming forward and this is unlikely to change before Christmas.” 

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