Farming feature: East Anglia’s farmland prices find sustainable level
- Credit: Archant
Land prices peaked around 2015 but since then their fortunes have been less certain. SARAH CHAMBERS asked the experts how the land lies, and whether there is any real certainty about what will happen to them over the next decade.
Average farmland values will remain under pressure in the short term, but in the longer term, land is a safe bet, according to East Anglian land agents.
They are not surprised that values have dropped off after unprecedented rises between 2010 and 2015 saw them reach an all-time high, with averages peaking at around £10k an acre.
But, while a number of factors remain uncertain, the region’s property experts believe that a shortage of supply should offset some of their impacts.
Will Hargreaves of Savills’ Ipswich-based rural team pointed out that while there had been downward pressure on values over the last two years, with averages falling by about 5%, the overall value of UK farmland over the past 10 years had risen by an impressive 149%.
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“Barring any major economic or fiscal changes, we do not anticipate significant price rises or falls in the short to medium term and are forecasting overall average growth of 5.5% for the next five years,” he said.
“When commodity prices began to fall it was clear that the more commercially farmed parts of the country would suffer the greatest effect of a land price correction.”
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The average value of farmland across the UK is likely to remain under some pressure in the short term due to low commodity prices despite the fall in input costs and increased subsidy receipts due to the weak value of sterling, he predicted.
But he added that low supply would underpin prices in the medium to long term, he said.
Oliver Holloway of Clarke and Simpson said low commodity prices, falling rents and uncertainty over the future of direct support were all important contributing factors to the falls in value.
“Despite the rather unexciting commodity prices, there hasn’t been a significant increase in supply in East Anglia and Clarke & Simpson have still experienced examples where sales have been very strong and often as a result of local competition,” he added.
But predicting the future is “always difficult, and in my view, potentially dangerous”, he said.
“I am of the opinion that we will continue to see activity within the market place, but that there will be a widening disparity of prices being achieved - a trend which has emerged since the peak in 2015.
William Hosegood, senior associate at Brown & Co, said it was hard to predict what would happen to land values after 2015.
“Based on depressed commodity prices and cash flow pressures we expected the market to react, especially with the uncertainty brought on by the vote to leave the EU in June 2016. All of these factors have brought the average land price down, but more importantly we have seen a wider gap between the top and bottom of the market,” he said.
“We have also seen some better land not selling which is perhaps a little more surprising.”
He suggested landowners considering seeling might be best to act “sooner rather than later”.
Giles Turton, an associate at Cheffins, said the rapid growth in farmland prices between 2010 and 2015 was seen by many as unsustainable, to it came as “little surprise” when values dropped off.
The high prices started to create issues within the industry and a realignment over the past two years had been welcomed by many, he said.
His team expected prices to plateau over the next year as the market finds a sustainable level.
“There has been a shortage of good quality larger farms for sale in East Anglia throughout 2016 and early 2017, and the combination of the supply-demand gap and improving arable profits has helped to maintain values in the Eastern region,” he said.
“Farmers and landowners alike should not be concerned by prices stabilising as buyers are still active in the market for all sizes of land parcels.”