Farmland values ‘will continue to rise in 2015’
- Credit: Archant
Demand for good quality farmland saw values rise to record levels last year, with buyers shunning big farmhouses that could be costly to maintain in favour of bare land, a study has found.
The average value of English farmland rose by 4% in 2014, breaking the £10,000 per acre barrier for the first time in its history, and the trend is likely to continue, according to land experts.
Estate agents Smiths Gore, which has offices in Newmarket, found that land area for sale increased by 46% in the East of England, up from 13,400 acres in 2013 to 19,500 acres last year. It expects farmland values to continue to rise, but modestly, this year. It predicts a rise of 3 to 5% in 2015, down on the 9% average over the last five years.
In 2014, the value of farms with houses and buildings, known as equipped land, rose by 2%, compared with a 12% gain in 2013. This weaker growth was due to buyers becoming more discerning about the quality and type of land that they will buy, it said.
Pre-2014, there was strong demand for land of all qualities and buyers would bid above asking prices to ensure that they were successful, Smiths Gore, which took the figures from its comprehensive database of all sales of publicly marketed farmland in England over 50 acres.
There were fewer bidders on lower quality land and buyers actively avoided farms with large farmhouses that could be costly to maintain, it said.
The value of bare farmland, with no houses or buildings, rose by 7% in 2014 to an average of £7,600, after a 2% increase in the final quarter.
- 1 Suffolk's first blue badge prosecution for Haverhill woman
- 2 Former Blue McGoldrick linked with League One move
- 3 Go-ahead given for 40 new homes in Suffolk village
- 4 Driver blamed Amazon training for 13 speeding offences in Suffolk
- 5 Five people injured and air ambulance called after car overturned in crash
- 6 Seven Suffolk villages that have received national recognition
- 7 'Significant' amount of Class A drugs and taser found at home in Suffolk
- 8 Plans seek to create traveller pitches for family use
- 9 Road closed and person trapped in car after crash
- 10 Protests against soaring fuel prices planned for Monday
Demand for bare land was almost entirely from farmers – rather than from lifestyle buyers or investors – and it has remained strong, especially for arable land, which rose by 6% in 2014, compared with grassland, which rose by 3%.
Equipped farms rose from £10,800 an acre at the end of 2013 to £11,100 at the end of last year.
Sam Tydeman, who heads up Smiths Gore’s Newmarket office, said farmland’s strong rise in values, which started before the recession, continued last year, making land one of the best performing assets of the last five years.
“Both bare and equipped values have now increased for five consecutive years, with equipped land values rising by 54% since 2010, from £7,200 per acre, and bare land values rising by 58%, from £4,800 per acre,” he said.
110,100 acres of land were publicly marketed in 2014, which is 9% less than in 2013 and slightly below the five-year average but well above the historic low of 90,500 acres in 2012.
The amount of land for sale has fallen consistently since the 1970s, making 110,000 – 130,000 acres “normal market activity”, which means that last year just fell within the range.
However, demand continues to outweigh supply, said Smiths Gore, driving continued price rises, especially for larger arable blocks.
There were 18 properties over 750 acres marketed across the country in 2014 - more than in 2011, 2012 and 2013, when 15 were marketed in each year.
The company says it expects farmland values to continue to rise, but modestly. It predicts a rise of 3 to 5% in 2015, donw on the 9% average over the last five years.
Uncertainty over the Common Agricultural Policy has now been removed, as farmers now know how it will be implemented over the next five years.
“This has removed one uncertainty from the market and the reform was as positive for farming as it could have been, given the pressure on the European Union’s budget,” said Smiths Gore.
“Agricultural commodity prices are lower than a year ago. We do not think this signals a period of volatility and indeed prices have improved for combinable crops, beef and sheep over recent months. Further, the five-year outlook for agricultural commodity markets remains positive. This should provide some comfort for farmland buyers.”
The outcome of the 2015 General Election is less predictable than in recent history, and it’s not clear yet how its outcome will affect the economy, rural communities, agriculture and what the impact on land prices could be. The most significant risk to farmland prices remains a change in the beneficial tax treatment of farmland, said Smiths Gore, but rated this risk as low to medium.