Increase in supply of agricultural land stabilises demand

0
279
The supply of farmland has increased sharply in the first half of 2015, while demand has reduced, according to the latest survey by Royal Institution of Chartered Surveyors (RICS).

The supply of farmland has increased sharply in the first half of 2015, while demand has reduced, according to the latest survey by Royal Institution of Chartered Surveyors (RICS).

The outlook for price growth over the coming 12 months is more subdued and the report notes that falls in livestock and commodity prices are weighing heavy on rental values.

Commenting on the latest RICS Rural Land Market Survey, Mark Ludiman from Bruton Knowles’ Northallerton office said concern over all sectors of farm incomes were encouraging businesses to look harder at the economics of buying land.

Whilst demand from the so-called lifestyle buyers has increased, overall market sentiment shows land prices levelling out, or even reducing in places. The national picture is replicated locally and throughout Wales.

The increase in supply to the market is having the effect of stabilising prices at which land deals are being concluded. Whilst there are always local variations, and specific factors to be taken into account, the trend for greater land value stability seems set to continue for the coming year.

The RICS/RAU report revealed that transactional evidence of farmland values in the UK shows a reduction of 2.5 per cent in the first half of 2015 to an average of £9692 an acre. Average land prices are now 1 per cent lower than they were a year ago.

Prices in the Yorkshire Humber region were below National average, at £9,000 per acre for arable land and £7,500 for pasture.
Mark went on:

The market is becoming ever more localised. Private sales in certain areas continue to be well above market rates, but in less favoured areas it is a struggle to get interest at realistic levels.

The acquisition of land to benefit from development land rollover relief continues to be a strong driver in most regions. Whilst average values are useful, caution needs to be taken to look at each block of land on its own merits.

More on the open market is giving purchasers plenty of choice. Any reasonable commercial farm is still attracting a good deal of interest. Dairy farms can be difficult especially in areas where there is little choice to whom to sell the milk.

Previously overpriced properties seem to be finding purchasers once re-launched. Strategic land buyers are much to the fore as are those with roll over funds. A difficult market to call as I feel more thought is coming into play as to what to offer against a guide price.”

Mark said commercial farmers had been the most active as buyers in recent months, although the recent downturn in arable commodity prices may slightly temper their enthusiasm to acquire additional land in the coming months.

Interest from the dairy sector continues to wane, and it remains to be seen whether more dairy farms and land will be on the market in the Autumn.

The general strong level of support from lenders has given buyers the facilities to buy more land, but the report notes that yields for investment land remain at their all-time low of 1.7 per cent.

The breakdown of the results show that the South East of England has seen the largest price growth over the last year with both arable and pasture land seeing sharp rises of 10 per cent, going against the national trend.

Mark concluded:

The balance between supply and demand appears to be shifting. Coupled with low livestock and commodity prices, a strong pound and proposed interest rate increases, there is a greater degree of caution in the market.

The second half of 2015 and early part of 2016 looks set to present greater realism into the market, perhaps suppressing values further.

You can contact Mark Ludiman at mark.ludiman@brutonknowles.co.uk.

Follow us @BrutonKnowles