Suffolk: Farmland values robust in 2012 despite increase in supply

DESPITE a year in which the Suffolk farmland market has bucked the national and regional trends, with the county seeing a significantly greater acreage being offered for sale, there has been little sign of the increase in values running out of steam.

As in recent years the pattern has not been entirely consistent, with the differential between prime arable and poorer land continuing to widen.

The lack of momentum within the residential market has also had its effect on some sales where the farm has included a substantial house.

However, the trend in arable land values has remained firmly upward and, with the volume of land coming to the market in the county remaining relatively low by historic standards, despite the increase compared with recent years, Suffolk has proved no exception.

In fact, according to figures compiled by Strutt & Parker, Suffolk has seen the fastest growth in farmland values of any county in the eastern region, with an increase of 15% during 2012.

Average arable land values in Suffolk were also the highest at �8,705/acre, compared with an eastern region average of �8,263/acre.

“The strength of the farmland market in Suffolk was unexpected, with the battle that farmers had with a spring drought followed by a turbulent harvest and drilling season due to unprecedented rainfall,” said Giles Allen, from the Ipswich office of Strutt & Parker.

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“The farmland market remained strong despite the weather because of the confidence that the agricultural industry could garner from continuing strong soft commodity prices, and because 2012 saw a continuing of the supply and demand imbalance of farmland in the market across East Anglia.”

The eastern region as a whole – covering Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Lincolnshire, Norfolk and Suffolk – experienced generally low levels of farmland being brought to the market, with a total of around 20,000 acres, said Mr Allen.

Suffolk bucked the trend, however, to record its second highest figure for a decade, with a good number of farms being brought to the market throughout the spring, summer and early autumn and the majority of these selling well and quickly.

“Undoubtedly, the keenest competition and highest prices were paid for commercial blocks of farmland such as Kelsale Hall Farm, a block of 2,373 acres near Saxmundham which sold comfortably above its �19million guide price earlier in the year,” said Mr Allen.

“Other larger blocks of land in Suffolk included the Hengrave Estate, a block of 1,300 acres with 16 houses which sold well above its guide price of �15m, and North Green Farm near Beccles, a commercial block of 503 acres with five houses, which also sold well over its guide price of �5.1m. These blocks of land set a broad benchmark with values ranging from �8,000 to �12,000 per acre.”

However, he added that, while many respected market commentators had been announcing “the death of the residential farm market”, this had not been the case in Suffolk.

“Strutt and Parker sold a number of these including possibly the jewel of this market, the Capel Hall Estate, near Ipswich,” he said. “The estate comprised a beautifully positioned eight-bedroomed principal house set within large, formal gardens with three cottages, a range of traditional farm buildings, surrounded by 400 acres of grounds, grassland and arable land – a true gem, which eventually caught the eye of an overseas buyer.

“Other residential farms that sold across the county include Hill Farm, Brent Eleigh, a beautifully-situated 500-acre residential farm; Starhouse Farm, Thornham Magna, a 300-acre commercial arable unit; Hill Farm, Great Finborough, a picturesque 120-acre residential farm; and Church Farm, Chillesford, a 200-acre residential farm requiring refurbishment situated in the heart of the Heritage Coastline.

“All of these farms prove that there is a market for residential farms as buyers look to combine their home with a tax efficient investment such as UK farmland.”

Mr Allen concluded: “It really has been a remarkable year for the farmland market in Suffolk. Over 7,000 acres have been brought to the market and most of this has sold quickly and at levels around or over the guide price.

“It demonstrates not only the overriding strength of the farmland market, but the continued strong desire from both farmers and those from outside the industry to invest in UK farmland and farms.

“Suffolk, in its geographically advantageous position in central East Anglia, with good communication links to London and the rest of the UK, seems to reap the benefit of the strong market, which other parts of the region haven’t necessarily experienced.”

Peter Start and Will Hargreaves, from the Ipswich office of Savills, are agreed that Suffolk has bucked the national and regional trends this year, with more land being traded, both on the open market and through private sales, which has represented a significant proportion of the firm’s business in 2012.

They also agree, however, that volumes remain low by historical standards, so that values have remained strong, and also note that the differential between prime and poor arable land has continued to widen.

“We have seen prices push well above �8,000 per acre for some private and on-market sales,” said Mr Start, “but also some Grade 2 land which has sold for much less than that. It is very location-specific.”

Savills’ latest farmland values survey, covering the first three quarters of 2012, showed a 4% increase in prime arable land in the eastern counties to �7,700 per acre on average, although values have gone substantially higher in some cases.

By way of example, Mr Hargreaves cites a parcel of 78 acres of mainly Grade 2 land at Ovington, near Clare, and another consisting of 109 acres of Grade 2 land at Belchamp St Paul, near Sudbury, both of which sold for well above the �8,000/acre guide.

Around 379 acres of arable and amenity land at Stanway Hall Farm, near Colchester, also sold “extremely well” towards the end of the year, completing shortly before Christmas.

In contrast, however, 101 acres of land, also Grade 2, at Baylham, near Ipswich, sold for below its guide price, with difficult access from narrow roads a possible factor in deterring potential interest.

Several parcels of grassland at Stradishall, near Haverhill, together totalling 39 acres, sold for around �6,000/acre, a good sale for grass, while at Ubbeston, near Halesworth, 17 acres of grass was sold for in excess of its �8,000/acre guide.

The hunger for land among investors remains substantial, says Mr Start, making off-market deals relatively easy to achieve. “Generally, we try to test the open market but the opportunity for private sales is there,” he says.

The favourable Inheritance Tax regime is a major point in favour of farmland as an investment, although demand from neighbouring farmers, wanting to spread their fixed costs, has also been a factor in some locations.

“Suffolk still has some relatively small family farms where the successor generation does not plan to carry on,” adds Mr Start.

“The increase in land prices means there is a lot of value tied up and it can make sense to sell some or all and put the money in a pension pot or to release some cash for the children when they need it.

“People are reviewing their options in a way they might not have done when values were lower.”

This could result in more land coming to the market in 2013, but probably not in such volumes as to prevent prices to continue upwards. A fair amount of private trading is also likely, once again, he believes.

Although an improvement in residential values would see investors review their strategy, the fall in values in the sector in recent years suggests that it is not likely “to go steaming away” in 2013; nor is any change in Inheritance Tax expected.

As a result, Mr Start believes that an average value of �8,000/acre is a realistic possibility in Suffolk in 2013, although not across East Anglia as a whole as there is more lower value land elsewhere in the region.

For Framlingham-based agent Clarke & Simpson, 2012 has been a truly exceptional year, with the firm having acted for the purchaser of the Kelsale Hall Farm estate and marketed for sale, almost simultaneously, six residential farms and two substantial areas of bare land.

Senior partner Christopher Clarke said that while demand had been strong overall it had, nonetheless, been variable, with the sale of those farms including a large residential element sometimes proving “tricky”.

Oliver Holloway, a partner at Clarke & Simpson, said 50 acres of bare land at Rendham, near Saxmundham, had sold quickly for in excess of �8,000/acre, and 75 acres of land at Norton, near Bury St Edmunds, although sold in lots, had also averaged above the guide price.

Among the residential farms, Star House Farm at Thornham Magna, near Eye, which besides 312 acres of land included a period farmhouse and a range of modern farm buildings, attracted competitive bidding and some for “significantly” in excess of its �3million guide price.

The somewhat smaller Oxbridge Farm, at Fressingfield, near Eye, which comprised a farmhouse, buildings and 61 acres, also sold for “considerably above” its guide of �900,000, said Mr Holloway, after competitive bidding between nearby landowners.

Also eventually sold to a neighbouring farmer, after a process which included both farming and non-farming bidders, was Church Farm at Chillesford, near Orford, which comprised a Victorian farmhouse, buildings and 207 acres of land (including 145 acres with irrigation) and was offered with a guide of �2million.

However, the 329-acre Rookery Farm at Rendham and White Hall, Debenham, which came with 205 acres, both attracted considerable demand for the farmland and buildings but with rather less interest in each case for the whole package.

“Investment buyers and farmers alike were concerned that a large proportion of the respective guide prices were tied up with the farmhouses,” said Mr Holloway.

In both cases, the farmhouse was then lotted separately, with the two blocks of land being purchased by different investment buyers for “well in excess” of �8,000 per acre.

White Hall farmhouse, the adjoining buildings and 25 acres is expected to be re-marketed in the spring, while the owners of Rookery Farm have decided to keep the house in the family.

Finally, again illustrating the testing nature of the residential market, Sycamore Farm at Bramford, near Ipswich, which is being offered jointly with Savills, remains on the market despite a number of viewings.

It includes a Grade II-listed farmhouse, mature gardens, equestrian facilities, farm buildings and 34 acres, and carries a guide of �950,000.

Clarke & Simpson also reports a strong private market. “Buyers have mainly been investment style purchasers,” says Mr Holloway.

“This can often suit the vendor extremely well, particularly if they can continue farming the land on a Farm Business Tenancy or contract farming arrangement thereafter.”