Divided land: 2016 farmland prices split as uncertainty takes toll
- Credit: Archant
East Anglia’s farmland market fell from its 2015 peak this year - but there was a wide divergence on prices, according to land agents.
A period of political uncertainty, an extended period of low commodity prices and speculation over the future of UK farm subsidies and other factors have combined to cause a weakening of the market, although demand remains strong in some areas, experts from across the region say.
Simon Gooderham, director at Cheffins, said it had been a tale of two halves for the East Anglian farmland market across 2016.
“Firstly, the range across the region has widened and is becoming increasingly dependent on location,” he said.
“The best land in prime locations, such as along the Cambridge knowledge corridor, is still in demand with prices holding up well, whereas in less accessible locations which are more dependent on agriculturally-focused buyers we have seen prices drop back.
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“Overall, values across the region have fallen back from the peak of the market and although there are perhaps fewer buyers, the fundamental market drivers of tax investment and expansion are still very much in play.
“There has been a shortage of larger blocks of bare land coming to the market but these are still attracting interest from private investors and well financed agri-businesses, whilst smaller blocks have been difficult to place, particularly in the less accessible locations as these are increasingly reliant on demand from local farmers.
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There had also been a softening of rental land as tenants drive a harder bargain, he said.
“Tenanted land on offer through East Anglia has increased, again with retirement being a major factor. A number of farmers are looking to let their land whilst they watch the marketplace and make decisions on whether to sell.”
Giles Allen, partner at Strutt & Parker, said the farmland market in Suffolk, as across of all of East Anglia, had shifted as it aligned itself more closely with the fortunes of the farming industry.
Arable farmland values had fallen by between 5% and 10%, making £8,500 an acre “a fair average”, but the range of values remains wide with sales realising between £7,000 an acre to £10,000 an acre, he said.
“Quality and location are key factors. Drainage, crop rotation and black grass infestation now all can affect the value of farms,” he said.
However values had generally held up well after the referendum result, and demand in Suffolk remained largely farmer driven, unlike other parts of the country.
“Nationally the supply of farmland has fallen, but in Suffolk the supply of land has remained at similar levels, in fact at just over 6,000 acres, the amount of land sold in the county is 10% up on the last two years,” he said.
“The greatest change in the market is that some farms and farmland remain unsold and have even been withdrawn from the market.”
But residential farms were benefiting from an improved residential market, he added.
“One such farm and one of the best examples of a residential farm to come to the market in 2016 is St Clare Hall Farm, near Bury St Edmunds. It had an achievable guide price of £2,425,000 and after 30 viewings, not surprisingly sold for well in excess of this.”
He predicted 2017 could be the year of the residential farm, as there were an increasing number of buyers looking across the county.
Uncertainty in other investment sectors could also bring investors back to the farmland market. Large parcels of commercial arable land could outperform the market in general as agriculture’s contra cyclical nature is brought to bear, he suggested. He predicted that in 2017 the amount of farmland brought to the market would fall, thus maintaining land values at or close to existing levels.
Oliver Holloway of Clarke & Simpson said his firm had been involved in a number of land transactions across East Anglia in 2016.
“There can be no question that land prices undoubtedly peaked during 2015, but this happened prior to the EU referendum and in my view, was largely driven by the extended period of low commodity prices that farmers are still experiencing now. Although prices of £10,000/acre are still being achieved in specific cases, prices of around £8,000 - £9,000 an acre are now more realistic.”
Investors were still active in the market place, but with falling rents and uncertainty over future EU subsidies they were more cautious, he admitted.
But farmers remained resilient to short term fluctuations and a number of the farms that his firm had dealt with this year had been bought by neighbouring or nearby farmers.
“Water continues to be an exceptionally valuable commodity and when light land with the benefit of a good abstraction licence comes to the market, it typically generates strong interest,” he added.
“This was very much the case with Grove Farm, Blaxhall, which consisted of 176 acres of irrigated land near to Snape. The farm was launched onto the open market in May and following competitive bidding, sold significantly in excess of the guide price of £1.55m.”
Making any kind of predictions for 2017 was difficult, as there was little idea of what kind of support agriculture will receive post-Brexit.
“I do believe that we will continue to see greater disparity of price within the land market,” he said.
William Hosegood, senior associate at Brown & Co, said there had been an easing of land values partly because of low crop prices seen earlier in the year.
“Although we have seen a similar levels of farmland offered on the open market in 2016 compared with previous years, there has been less interest from potential buyers and therefore less competition resulting in lower prices paid,” he said.
“We have an interesting market comparison which shows the real changes of land prices in the last three years as a result of consecutive arable land sales in the same parish on the Suffolk/Essex border. In this parish we sold nearby parcels of arable land ranging from 100 to 300 acres in each of the last 3 years and the prices realised were as follows: £10,600 per acre in 2014, £9,800 per acre in 2015 and £8,500 per acre in 2016. The acreages have varied but this still gives a fair reflection of the changing market for commercial combinable crop land in our region.”