East Anglia: Farmland still seen as a safe investment

THE reputation of agricultural land as a safe investment has been further underlined during a year of turmoil elsewhere in the economy, according to rural property specialists in East Anglia.

Farmland values in the region have continued to rise during 2011, with the volume of land coming to the market remaining at an historically low level despite a modest increase compared with the exceptional shortages of the past two years.

And while the pressures on the residential property market have been reflected in the level of demand for agricultural holdings including a substantial farmhouse, farmers and investors have remained ready buyers for land.

Will Hargreaves from the Ipswich office of Savills said 2011 had seen a greater supply of land coming on to the market compared with recent years, with the result that the sharp increase in values seen in 2009 and 2010 had levelled off, but the level of activity remained low compared with five to 10 years ago.

The most significant trend had been the emergence of something approaching a two-tier market, with buyers being more selective than in recent years. As a result, land in popular locations had made �8,000 to �9,000 per acre while elsewhere even land of reasonable quality in terms of productivity might struggle to sell at �6,000 to �7,000 an acre.

Savills colleague Gi d’Angibau said that another factor has been a decline in the number of buyers in 2011 compared with the recent past. Some buyers had simply spent their money in the past two years and were no longer in the market while other potential buyers had perhaps become more cautious.

In particular, smaller residential farms where the farmhouse represented a high proportion of the value, had been “ more tricky to shift”, she said.

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Mr Hargreaves added, however, that during the second half of the year there had been more cases of people looking to sell of parts of their holdings, taking the opportunity represented by current market prices to raise some cash.

For example, 78 acres of good quality arable land at Ovington, near Clare, on the Suffolk-Essex border, was quickly under offer, and two fields between Ubbeston and Heveningham – one arable and one pasture, together totalling 17 acres – put up for sale by the same vendor quickly found separate buyers, although contracts were yet to be exchanged, said Mr Hargreaves.

Back in west Suffolk, 39 acres of amenity grassland at Stradishall, between Bury St Edmunds and Haverhill, which were off-lying from the vendor’s main holding, had also attracted plenty of interest from investors, with negotiations still in progress.

However, an example of the two-tier nature of the market was 16 acres of well-drained arable land, divided into two fields, at Thrandeston, near Diss, which had not sold and was to be re-launched in the spring, he added.

Although not typical of the market as a whole, Suffolk produced two of the largest holdings to come up for sale anywhere in the eastern region this year – the 1,442-acre Brook Hall Estate at Foxearth, on the Essex border near Sudbury, which was marketed by Savills in the autumn, and Kelsale Hall Farms, involving a total of 2,373 acres near Saxmundham, which came to the market through Strutt & Parker at around the same time.

A sale of the Brook Hall Estate, which also included a recently refurbished six-bedroom farmhouse, landscaped gardens and areas of pasture and park land, has been agreed at in excess of the �13million-plus guide price although the deal has not yet completed.

Kelsale Hall Farms, which was put up for sale by the Mormon church following a review of its holdings, carried a guide price of �19m for the whole and is currently under offer, having attracted more than 40 viewings.

In the earlier part of the year, Strutt & Parker, in conjunction with Summers Wykes-Sneyd, also marketed the 858-acre Edwardstone Estate near Sudbury.

Giles Allen from the Ipswich office of Strutt & Parker said that the property had attracted a good number of viewings, with the majority of the estate being sold for a figure just under the guide price of �9million.

More generally, Mr Allen said that farmland values in Suffolk had started the year at around �7,000 to 8,000/acre but as the year progressed this had risen to between �7,500 and �9,000/ acre.

However, he also noted a disparity between the top and bottom values, with the full range being �5,000 to �10,000/acre, and he agreed that values appeared to depend less on quality and more on accessibility and competition between often neighbouring buyers.

“Demand came from farmers but also from non-farming investors, either locally-based or from further afield such as the City, Channel Islands, Europe or the Far East,” he added.

Looking ahead, Mr Allen said: “Demand is likely to remain from farmers and those outside the industry who see farmland as one of the few safe investments currently available as well as having considerable tax advantages.

“Any increases however are likely to be small with an annual rise of around 5% probable, although a surge in soft commodity prices might see this at 10%”

With supply likely to remain tight, Savills forecasts an increase in farmland values of 5.7% next year.

Will Hargreaves added: “Most land can currently generated as good a return as a bank will offer so there is no reason for people to sell unless they need to release some value. Land is still seen as a safe investment.”