Greater variation in land values expected in 2016 as prices level off
- Credit: Archant
After eight years of rapid growth average farmland prices in Suffolk and Essex have levelled off during 2015, but some historically high prices have still been achieved.
Tim Fagan from the Ipswich office of Strutt & Parker said that farmers continued to represent the biggest proportion of buyers in the market, and they were, naturally, being more cautious in the face of low commodity prices.
“There has been a diminishing number of sales at premium prices, although high prices are still being achieved for the right offering,” he said. “Strutt & Parker expects prices to be flat next year with small increases perhaps kicking in again in 2017-18.”
Will Hargreaves from the Ipswich office of Savills said: “The Suffolk farmland market of 2015 has been marked by a noticeably smaller buyer pool and a further softening of the average land price.
“Those who have purchased have often been neighbouring occupiers who, in competing with other non-farming and specialist buyers from further afield, are often motivated to pay more.
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“Land values are unlikely to shift dramatically next year but if considering moving or selling in 2016, finding an experienced agent with both good local knowledge and a comprehensive understanding of national buyers is key to securing a premium price in a less certain market.”
Mr Fagan said figures compiled by Strutt & Parker showed that around 8,700 acres of farmland had been sold in Suffolk and Essex this year, at an average of £10,250 per acre. This compares with 7,400 acres sold last year at an average of £11,000/acre and 2,7000 acres in 2013 at an average of £9,000/acre.
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“The marked increase in acreage sold since 2013 is as a result of significant rises in value since 2007 when land was being sold at circa £4,000/acre,” said Mr Fagan.
However, he added that, while land values were affected by many factors, a key issue for farmer buyers was the price of wheat, with a 12- to 24-month delay generally seen before price changes were reflected in the movement of land values.
Over the last three years, the price of wheat had fallen from £200 per tonne in January 2013 to £150/t in January 2014 and £120/t in January 2015, with a figure of £115/t projected for January 2016, he said.
“Predictions for land values are a general plateauing at circa £10,000/acre average, but there will be a growing range where in some areas prices will exceed this due to high demand from buyers with cash/income from alternative businesses, such as building lets/development, and in other areas with less opportunity for alternative income or where soils are of varying quality, values will be below this average,” added Mr Fagan.
Mr Hargreaves said that selling privately may now yield the strongest sale price in some areas and next year may see more off-market transactions.
One example of this, he said, was the sale of Red House Farm at Shotley which was handled by Savills’ Ipswich office in the autumn.
The property included around 240 acres of land, with light soils and plenty of irrigation, plus a good farmhouse, traditional outbuildings and a number of cottages, all in a popular location with land running down to the river Orwell.
Peter Start of Savills, who led the sale, said: “The vendors decided to seek a buyer last summer but hoped that a sale could be concluded without publicly advertising the farm.
“Having spoken to a small number of buyers a sale was swiftly agreed to a buyer from further afield who was particularly keen to find a farm in that area and known to us through our wider network. The sale was completed this autumn at a premium price in excess of the vendor’s expectations.”
Mr Start said this showed how private sales, in the right circumstances and with the benefit of good market knowledge, could secure excellent outcomes, particularly with falling land prices.
“We were delighted to once again be handling a sale of another good property on the popular Shotley peninsula and the positive result confirms that strong values can still be achieved with the right approach and a good reach to a range of committed farm purchasers,” he added.
Conversely, Mr Hargreaves said that an example of how a public sale can still achieve good results was demonstrated by the recent offering of Sunny Farm at Tuddenham, near Ipswich.
“After a brief marketing period leading in to winter, typically a quieter time for the land market, the farm generated significant interest and is now sold subject to contract,” said Mr Hargreaves, who handled the sale.
“Sunny Farm represented a hugely attractive opportunity for a buyer looking for a farm with various other angles to purchase land in a strategically important location. It proved to be popular and our clients are delighted to have agreed a sale so swiftly.”
Looking ahead, Mr Hargreaves shares the view that prices are likely to be spread more widely in the comming year.
“2015 has been a period of change and it is possible that 2016 will continue this trend with even greater variance in the best and worse prices paid,” he said.