Monday, June 18, 2018

Farmland market sits tight as Brexit uncertainty looms

April 3, 2018 by  
Filed under Property

Farmland prices remain relatively steady compared to a year ago, confirms the latest survey by the Royal Institution of Chartered Surveyors in partnership with the Royal Agricultural University.

The transaction-based measure of prices – including a residential component – rose fractionally in the second half of 2017, according to the survey. But at £10,260/acre, prices remain slightly down (2%) on a year ago.

Meanwhile, bareland prices fell over the same period, with the opinion-based measure slipping a further 1.4% leaving it down 8% year-on-year – prompting RICS to call for clarity from the government on its plans for agriculture after the UK leaves the EU.

RICS policy manager Tamara Hooper said: “We have seen demand, prices and rents fall since the EU referendum and now our latest survey results point to less availability of land for would-be buyers.

“RICS has continuously called for government to support agriculture and horticulture and when 60% of the sales market is driven by farmers it is clear that government need to provide yet more clarity and certainty.

“However, we cannot deny that the nature of rural land-based businesses continues to evolve. With the inevitable restructuring of UK agriculture ahead, there will be a need to support all rural business activities beyond primary agricultural production.”

Downbeat

Moving forward, price expectations are slightly downbeat with 13% more respondents expecting to see land prices fall, rather than rise, in the 12 months ahead. Again, sites including a residential element continue to fare better than commercial only.

Availability of farmland for sale continued to fall with respondents returning the most negative reading since 2004 in net balance terms. Both residential and commercial units saw supply decline in the latter part of 2017 with contributors citing Brexit as having an impact.

The issue of Brexit and its effect on the rural land market has now been highlighted by respondents in every survey since the referendum. Looking ahead over 2018, 32% of respondents felt the ongoing Brexit process would result in less land made available for purchase.

After a two years during which demand has deteriorated, these latest results show a stabilisation in new buyer interest. Individual farmers continue to drive interest in rural land. They account for 60% of purchases while lifestyle buyers make up just over a fifth of all transactions.

Plots with a residential element are more highly desired than commercial only units. This trend is long established and has been seen for the last six successive reports. Buyers tend to focus on high quality land in a good location. Lower grade farmland is harder to shift.

Average arable land rents dipped in the second half of 2017, but were still up by 4% over the year. But arable rents remain down by more than 10% compared to their 2014 peak. Pasture rents also slipped during the second half of 2017, albeit marginally, equating to a 1% annual decline.

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