Farming News - Non-farming buyers set the pace in English farmland market

Non-farming buyers set the pace in English farmland market

24 Jan 2019
Frontdesk / Finance

The value of farmland is being supported by strong interest from lifestyle buyers, investors and high net worth individuals, with farmers accounting for less than half of all purchases in 2018.

According to the Strutt & Parker Farmland Database, the average price of arable land in England rose by 2% in 2018 to £9,400/acre. This is down by £1,300/acre from its peak in Q2 2015, but only a little below the five-year average.

Image result for strutt and parker farmland

“The farmland market has proved more resilient than many might have predicted considering the Brexit-related uncertainties and practical challenges posed by the weather over the past 18 months,” says Strutt & Parker’s head of estate and farm agency Michael Fiddes.

“The Agriculture Bill, published in September, confirmed the government’s intention to phase out support payments over a seven-year period and much has been made of the negative impact this could have on land prices.

“However, farm profitability is only one of a number of factors that determine farmland prices, not least because farmers are not the only people who buy land. Our data confirms that over the past two years non-farmers have played an increasing role in the market.

“Land in the right location remains in considerable demand for capital investment for many non-farming reasons, including development potential, privacy, tax reasons, or amenity. For many of these investors, generating profits from farming is not their primary focus.”

Mr Fiddes says while this non-farmer demand continues to be strong, the percentage of land bought by existing farmers has decreased, creating a wide range of values achieved which are not immediately apparent from average prices. The price of arable land in England during 2018 ranged from a low of £4,575/acre to a high of £15,000/acre. Location rather than quality of land continues to be the key driver of the price achieved.

“For the first time since we started compiling detailed records in 1996, farmers accounted for less than half of the buyers in 2018,” he said.

“Conscious of the likely squeeze on farm profitability going forward, farmers are finding it more difficult to justify buying land funded by borrowings so are taking a more cautious approach. 

“However, the most entrepreneurial farmers remain in the market for more land if it is in the right location and at the right price.”

Mr Fiddes says in the immediate future lack of supply is anticipated to support values.

“Whilst the amount of land available rose sharply in Q3 2018 this was, to some degree, due to one or two large sales and relatively little has been marketed since. History shows that in times of uncertainty around CAP reform supply of land in the market has tightened.”

In the short- to medium-term the expectation is a widening in the range of values achieved.

“Bare land in areas where there is little interest from non-farming buyers is where there is greatest downside risk, but it is likely to be a different story for land with strong appeal to non-farmers, or for land with strategic development potential. Overall, we expect that in 2019 and 2020 we could see a decrease in average farmland prices, but that growth will return from 2021 onwards.”

Key stats:

  • Arable land sold from £4,575/acre to £15,000/acre in 2018. This is a wide range, affected by location more than land quality.
  • Most arable land is now selling for £8,000 to £10,000/acre, which is down from its peak in 2015, but still a considerable increase from ten years ago.
  • Most pasture land sold for £6,000 to £8,000/acre, but an increasing amount sold for below £6,000/acre.
  • More than 100,000 acres of farmland were publicly marked in 2018 – for only the second time in ten years.
  • However, overall the total number of farms publicly marketed remains pretty stable at around 220-230.

Regional commentary:

“We saw an increase in the acreage available in the East of England in 2018, which can mostly be attributed to the sale of a few large farms.  Farms are finding buyers - a mix of farmers and investors – albeit, there are differing levels of interest according to location, with demand tending to be stronger for farms in the southern half of the region. Overall, prices are typically between £8,000 to 9,000/acre, with a handful of exceptional sales going through at up to £11,000/acre. Meanwhile, land in the more inaccessible parts of the region, is attracting bids of £6,000-£8,000/acre. In such a variable market, the key to a successful sale is local knowledge.” Giles Allen, East of England region

“Overall, it feels like the market has held up remarkably well considering the uncertainty that people have been facing. We continue to see strong interest in smaller blocks of land and at the super-prime end of the property scale. It is the middle ground that is proving stickier, hence why the number of completed sales is down. But while there are fewer buyers, those who are in the market are highly motivated. Arable values are ranging between £6,500/acre and £12,500/acre, but with the majority of land exchanging hands in the £7,250-£8,750/acre price bracket.” Will Parry, Northern region

“The East Midlands proved to be one of the hottest markets for farmland during 2018. Prices remain highly variable, but almost everything we’ve put on the market has sold – some of it extremely well. The best sales achieved prices in excess of £14,000/acre, although in less popular areas arable land has also exchanged hands at £6,300/acre. Location is key, with a lack of supply and strong competition between buyers with rollover money helping to drive up the value of property in the right location.” Sam Holt, East Midlands region

“The mood is relatively confident in the south west of England, despite the uncertainties facing the market. It is a part of the world where values tend to be underpinned by strong demand from amenity buyers, with Dorset, Wiltshire and Hampshire perennially popular for buyers looking for their own slice of England within reach of London. We are also seeing demand from people who are comfortable with the idea of holding land for multiple generations, so are not viewing it as a short-term investment. Arable land is generally selling for £8,500-£9,500/acre and pasture for £6,000-£7,500/acre.  There are pockets of strength in areas where supply is scarce, but fundamentally the best sales are being achieved as a result of regional agents knowing exactly which buyers are out there and what they are after – enabling them to tailor their marketing approach accordingly.” Will Langmead, South West region

“The key to successful farmland sales in the south east of England is local demand. The market, like everywhere, continues to be polarised, but the most competitive bidding is happening where there is strong local interest from neighbouring or close-by farmers looking to secure extra land on their doorstep. This trend is exacerbated by the fact that supply levels remain reasonably tight in the region. Best-in-class residential farms are selling well, but, in line with the slowdown in the top end of the housing market, buyers have become fussier about properties where there are compromises to be made.” Matthew Gibson, South East region

"Despite doom and gloom predictions being made in the media regarding farmland values, for both our vendors and buyers there is still a good market and deals are being done for sensibly-priced blocks of land and farms in the right locations. The amount of land put up for sale in the Central region has risen over the past 12 months and we may well see another increase in 2019, as we have been invited to provide advice on more properties in the past three months than for some time.  We have seen a slowdown in the residential end of the farms market, particularly where the residential value makes up more than half of the total price. However, values of prime arable land have held up very well. Looking at the sales of arable land we handled in 2018, only one farm sold for less than £10,000/acre, with the rest achieving between £10,000 and £12,000/acre.” Matthew Sudlow, Central & West Midlands region