William Hargreaves from Savills discusses recent and future trends in the farmland market.
Last year was a pivotal one for farmland supply – with 157,200 acres marketed across Great Britain. This was a rise of 15% compared to the previous five-year average, but still below the 162,000 acres average recorded during the years between 2003 and 2016.
The increase can largely be attributed to many farmers reassessing their options and in some cases deciding to leave the industry following the continued phasing out of the Basic Payment Scheme (BPS).
Interestingly, the East of England somewhat bucked this trend with supply 15% down year on year, which was largely due to some significant estate sales in 2022. Suffolk and Norfolk saw the most farmland sold in the region last year, with the East making up 16% of all farmland marketed nationally.
Prices achieved, meanwhile, varied and were influenced by factors including location, scarcity, strength of neighbour interest and specific characteristics and assets of the farm in question.
There were more opportunities, for example, to purchase smaller blocks of land of say 50-100 acres than there were well-equipped commercial-scale farms.
This kept prices for the latter relatively robust and – although we witnessed a slight softening – the average price achieved for prime arable land still sat at £10,192 an acre in the East of England by the end of last year. This was on par with the national average and higher than any year end since 2015.
The price paid for Grade 3 arable land in the East of England sat at an average of £9,327 an acre, while the average value of poor quality arable and livestock land rose to £7,806 an acre (an increase of 4%) and £2,871 an acre (an increase of 6.6%) respectively – largely driven by environmental investors.
Other buyers included neighbouring farmers looking to expand existing operations and those motivated by business asset rollover relief.
Looking ahead, the continued phasing out of BPS means many farmers may well continue to evaluate their options and restructure. Consequently, we expect more farmland to come to the market this year, before stabilising at around 180,000 acres per year across Great Britain by 2028.
The increase in supply means growth in farmland values nationally is expected to be modest.
The good news for the East of England is that rollover buyers tend to be particularly interested in arable land – which we obviously have in abundance – and this may positively influence values. Consequently, we forecast that prime arable and Grade 3 arable land values will increase by a national average of 3% and 2.5% per annum respectively over the next five years.
Historically, the farmland market has proved resilient, and there’s no sign of that changing anytime soon. Demand for food, fibre and fuel products will remain, while the maturing market for nature-based solutions will continue to make it an attractive asset for investors large and small.
For many farmers 2024 may well be a year that proves the catalyst for significant change – and it remains an opportune time to weigh up your options.
For advice on the rural sector in Suffolk contact William Hargreaves at Savills on 01473 234802 or WHargreaves@savills.com
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