Farmland sales slump to record lows amid crisis
PUBLISHED: 11:14 14 October 2020 | UPDATED: 13:29 14 October 2020
Strutt and Parker
Sales of publicly-marketed farmland have plummeted to an all-time low across Suffolk, Essex and Norfolk as a result of the coronavirus pandemic.
Land agents predict 2020 will see the lowest amount of land marketed across the UK on record as the crisis and Brexit continue to have an impact.
Strutt and Parker says while supply is low, demand is varied due to the uncertainty caused by the two factors.
According to its analysis of the Farmland Database – which records details of all blocks of publicly marketed farmland over 100 acres – just 46,000 acres of farmland have been launched on the open market in England so far this year, which is well below the five-year average.
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In total, just 5,600 acres were publicly marketed in Norfolk, Suffolk and Essex during the first nine months of the year – about 30% below the five-year average.
With relatively little land expected to come forward in the latter part of the year, agents now think it is “inevitable” that 2020 will see the lowest amount of land publicly marketed on record.
Meanwhile, private sales have become more dominant, with big variations in top and bottom prices due to swings in demand.
Michael Fiddes – who heads up the East Anglian office of Strutt & Parker’s estates and farm agency department – said the swing towards private sales had been marked across the region.
“The land market has been noticeably quiet in East Anglia in 2020, with hardly any land being publicly marketed in Suffolk and most of the land sold in Norfolk being marketed privately,” he said.
“This is a real trend we are picking up – we believe it is partially due to the Covid-19 pandemic, but equally the private sale market is growing at any event.”
Just 16 farms were launched on the open market across the counties, compared with a five-year average of 22. Across the UK, just 152 farms were publicly marketed.
“Without Covid-19 it was always going to be a late year because of a very wet first quarter, but even so supply does seem to have been affected by Covid,” he said.
But those farms were selling and continued to do so through lockdown, with the East Anglian market less affected by pandemic restrictions than other areas. This was because transactions for commercial farmland were able to proceed when it was more difficult for residential farms, he explained.
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“Lack of supply is helping to hold up prices, but there is a wide variation in values being achieved – currently ranging from £6,000 to £11,000/acre. The best prices are being achieved from rollover buyers, so location and size have been key in achieving the best prices, whereas smaller sales are very dependent on local farmer demand.”
Matthew Sudlow – head of estates and farm agency at Strutts – said across the UK some sellers were choosing to hold back until the worst of the crisis is over, while others were opting to sell privately.
“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,” he said.
“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 that have been marketed were selling – but demand depended on whether there was a local farmer-buyer or the farm had broader appeal to investors or lifestyle buyers.
Farmers remained the predominant buyer type, he said, with sales typically involving farmers with rollover funds or large farming businesses in the market for land which allowed for expansion. But these were taking a cautious approach on price, given the impending loss of support payments and its effect on profitability, he added.
About 30% of arable land was selling for more than £10,000/acre, and 20% sells for less than £8,000/acre with the rest in between, he said.
A wide range of factors were making predictions about the future market difficult, including the outcome of trade deal negotiations with the European Union which was likely to have a major influence on farm profitability, he said.
“There is a belief among 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.”
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 among 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.”
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