The decline in farmland values slowed during 2017, with average values showing a year-on-year fall of 2% compared with an 6% drop between 2015 and 2016, according to analysis by property and land specialists Strutt & Parker.

The company’s Farmland Database shows the average price of arable land in England was £9,300/acre in 2017, slightly below 2016’s average of £9,500/acre.

image expired

“Farmland prices proved remarkably resilient in 2017, defying those commentators who predicted sharp falls in the immediate aftermath of the referendum result,” said Strutt & Parker’s head of national estates and farm agency Mark McAndrew.

“While the uncertainty surrounding Brexit has taken some of the heat out of the market, the average value of arable land actually climbed during the last two quarters of 2017.

“However, we continue to see a wide range in prices paid – from a high of £16,500/acre for arable land to a low of £6,000/acre. The amount of land selling for more than £10,000/acre also dropped to less than a third in 2017, compared to nearly 50% three years ago.”

Mr McAndrew said that tighter supplies had helped to support average values.

“But it is demand that is really driving the market, with the highest prices being achieved in those areas which attract interest from non-farmers, who are buying for lifestyle, investment and tax reasons.

“There are an increasing number of farmers looking to roll-over development money into a land purchase which is driving competition.”

The strength of local interest can have a dramatic impact on the price paid for very similar properties. One block of Grade 3 arable land in Hampshire recently sold for £14,000/acre, but another just five miles away, of a similar size and quality, went for £8,000/acre.

Overall, the average annual price of arable land has fallen by about 8% since the very peak of the market in 2015.

In the short-term, Mr McAndrew said he expected the price paid for individual farms to remain highly variable, but average values are likely to remain broadly stable, assuming there are no adverse changes to the tax treatment of land or the UK ends up with a ‘harder’ agricultural Brexit than expected.

Strutt & Parker is forecasting there could be a return to growth in capital values over the medium term due to continued restricted supply and increased demand from rollover buyers.

Each December the business works with independent economic consultants Volterra to produce forecasts for how farmland prices might change over the next five years. The forecasts are based on Auto-Regressive Integrated Moving Average (ARIMA) models of the market since 1997.

“While farmer-demand weakened in 2016 and 2017, there are signs of it strengthening,” said Mr McAndrew. “There is strong demand from rollover buyers and some farmers are still interested in buying as farm incomes have been buoyed by higher commodity prices due to the weakening of Sterling.

“There is also some medium-term certainty around support payments following DEFRA secretary Michael Gove’s recent announcement that area-based payments will continue in some form under the new British Agricultural Policy until around 2024.

“Interest from lifestyle buyers will continue to boost demand in some areas.”

The company’s current view is that the outlook lies between the low and central forecasts set out below:

Forecast percentage change in English farmland prices for next five years

N.B. Forecasts made December 2017 (next update due in December 2018)

Regional outlook:

“We have seen an influx of rollover buyers over the past year who are on the hunt for commercial farms. Sporting estates are also in demand from non-farming buyers. In terms of demand and price, the polarisation continues. Land is typically selling for its guide price, or close to it, or not selling at all. Arable values are currently ranging from about £7,000/acre to £14,000/acre, while grassland is selling for between £5,500/acre to £9,000/acre.” Charlie Evans, South West region

“The market is currently best described as cautious, with each property attracting differing levels of interest. Some farms fly off the shelf, while others stick. There was a noticeable slowdown in land coming forward during the last three months of the year, which means much of the land currently available is farmland which was launched earlier in 2017 and is yet to find a buyer. Where land is selling, arable values are typically ranging between £6,000/acre and £10,000/acre, with pasture selling for £4,000 to £8,000/acre.” Will Parry, North region

“Tax-driven buyers are generally leading the market in the East Midlands, particularly those who are in funds as a result of selling development land and only have limited time in which they can benefit from rollover relief for Capital Gains Tax purposes. As we enter 2018, I anticipate a continued variance in prices paid across the region, with land in popular areas which has a historic lack of supply achieving strong prices. We have a number of farms coming to the market in the spring which should attract both local and national interest.” Sam Holt, East Midlands region

“2017 saw a fall in the number of farms brought to the market in the East of England. This has helped to keep prices relatively stable, with arable values typically around £7,500 to £9,750/acre. While demand is more muted than it was at the peak of the market, nearly 90% of the land marketed had found a buyer by the end of 2017. Expansion-minded farmers remain key players in the market, along with investors with rollover funds. The farms achieving the best prices are in the right location for these buyers.” Giles Allen, East of England region

“The South East saw a large reduction in the supply of land coming forward during 2017, compared with the previous year. Demand remains strong for commercial arable ground because of the number of farmers with windfall development funds looking to buy bare land close to their existing units. There is also competition among lifestyle buyers looking for residential farms which might offer a beautiful house surrounded by its own land providing privacy and protection.” Matthew Gibson, South East region

“Arable land is currently tending to trade between £8,000/acre and £10,000 acre, although in some cases, particularly off-market, premium prices of over £10,000/acre are still being achieved. Prices are being supported by the number of rollover purchasers in the region who are looking to reinvest funds from development deals. They are seeking large blocks of commercial arable ground and do not necessarily need them to be within close proximity of their existing land holdings. Attractive, ring-fenced residential farms in good locations continue to sell well, too.” Matthew Sudlow, Central region