East Anglia: Gap ‘will widen’ in land market
- Credit: Contributed
DIVISIONS in the land market are likely to become more pronounced this year, a land agent has predicted.
Bidwells believes the two or three-tier market which has developed over recent years will become more prevalent, with high quality land maintaining or exceeding current prices, while poor land struggles. “The most profitable of land will be keenly sought after and will achieve the premiums which we have seen over the last 12 months of figures in some instances well, above £10,000 per acre. For the more standard cereal producing areas, the £7,000 to £8,500 will continue to be common with higher levels in those areas only being achieved through strong neighbourly competition,” said agent James Brooke.
Mr Brooke, who works in Bidwells’ East Anglian rural land and business department and is based at the Norwich office, said 2012 will be looked back on with mixed emotions.
“Some will have achieved a record price for their farm if they have been selling it in the current market, others will feel that they have paid a record price,” he said.
“Those still in farming will remember it as one of the most difficult Summer’s and probably the worst Autumn for many years. Those who look back will see it as another blip in what has been an extraordinary progression of land values over the last 20 years.
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“As we enter into 2013, Common Agricultural Policy (CAP) reform is taking a more prominent position in people’s thoughts which historically has lead to some uncertainty in the market. If there is going to be any uncertainty in 2013 it relates to what price people should pay when opportunities to buy land come about. Increasingly site specific issues are influencing outcomes with land quality being an important factor.
“In the past where land has come available on a boundary, it has often been seen as a “must have” opportunity. I am not so sure that this is the case now.
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“Profitable, well managed farming businesses are increasingly reluctant to water down the profitability by taking over medium to poorer quality land purely because it is adjacent to them. Whilst scale is important, it has to be balanced against the ability to generate profit. That profit will increasingly be made from land which is not dependent upon subsidy for a large proportion of that profit both currently and more importantly in the future.
“Whilst the current round of CAP reform is unlikely to threaten the subsidy payment significantly, the long term direction of travel for support must be downwards. Budgetary pressures within the EU are not going to go away and with agriculture continuing to take a significant proportion of that budget which means the pressure for a reduction in subsidy is undoubtedly going to become stronger.
“Looking back on the above, it could therefore be argued that land prices are going to suffer. The investment community, which is growing are extremely focussed and driven by return and will continue to focus purchasing interests around the high quality land capable of producing consistently good returns as a result of diverse cropping potential. Climatically and geologically this land is likely to be in the Eastern region of the country where even this Autumn some farms have taken advantage of the wet Summer conditions to produce some of the very best results they have seen for a number of years and where the establishment of the 2013 harvest although difficult and patchy is considerably more advanced than in other parts of the country.
“Our predictions for 2013 and beyond are therefore that the development of the 2 or 3 tier market we have seen over recent years is going to become more pronounced. High quality, highly productive land capable of diverse cropping, very often supported by secure sources of water will increase in value. Reliable cereal producing land capable of producing consistently good yields will maintain current levels and in competitive situations, perhaps exceeding them.
“However, increasingly poor quality land in less strong farming areas and where perhaps land sales in the past have depended upon more residentially lead purchasers, we see these areas weakening. Therefore the most profitable of land will be keenly sought after and will achieve the premiums which we have seen over the last 12 months of figures in some instances well, above £10,000 per acre. For the more standard cereal producing areas, the £7,000 to £8,500 will continue to be common with higher levels in those areas only being achieved through strong neighbourly competition. Those farms or areas of land which are blighted or which are genuinely of poorer quality whether it be due to their land type, field size, proximity to market or otherwise will increasingly struggle to find a buyer unless at an appropriately discounted figure.
“As to the supply in 2013, we believe there will be significant regional variations but it does not appear that at the moment there will be any more coming to the market in the Spring of 2013 than there was in 2012 and potentially less in some areas.
“Factors which will stimulate land coming to the market remain the same. Death, divorce and debt but perhaps increasingly the uncertainty of income could start to feature in some of the smaller farming businesses equations and it could in time bring some smaller areas to the market.
“The shortage is going to be in the large commercial opportunities. Either owned and operated by large substantial profitable farming enterprises or where income from those businesses is viable as a result of them being able to capitalise on strong contracting businesses and deriving a respectable income as a result.”