Being Realistic Reaps Rewards

October 11th, 2008

With the economy in crisis, most property sectors are facing very difficult times. An exception is the rural property market, and the land market in particular. However, uncertainties for the future do exist.

Agricultural land can be a very good investment. It is a finite resource and, due to concessions on inheritance tax, it may be a good vehicle for passing on wealth. 100% relief is available where land has been owned for more than seven years, or has been farmed by that person for two years. There are various means whereby the land can be farmed without having to be “hands on”, so don’t worry too much if you wish to invest but you cannot milk a cow or plough a field. Agreements do need to be carefully drafted, so ensure that you take good advice.

Income from land can come from various sources. Despite the see-saw in farming fortunes, there are still existing farmers seeking to rent land and we have seen rents as high as £150 per acre paid recently in certain locations. In some cases, the landowner may be able to retain the Single Payment and boost income further by entering the land in the Environmental Stewardship Scheme.

Returns on land for the non-occupying landowner have improved in recent years and there has been good capital growth. The market for land has been buoyant over the past year with blocks of agricultural land throughout the region selling for as much as £10,000 per acre.

Commercial farms and smallholdings have also been in demand, withs ales tending to be readily agreed. The market for paddocks has remained surprisingly firm in the credit crunch, with prices of as much as £20,000 per acre still achieved. Caution should be exercised as it seems the market is becoming more dependent on local demand.

Earlier in the year, with milk prices having increased, and wheat prices at their highest for many years, the farming community seemed to feel more affluent and entered the land market boosting values, probably at a time when the non-farming buyer began to drop out. There is a growing realism that farming fortunes may not be as buoyant as first thought and purchases are now more carefully considered. Land values currently achieved tend to be dependent on local demand and, where there are two potential buyers due to location, then premium prices can be achieved. Where there is no local demand, then land can be more difficult to sell.

The market for equestrian property has also remained firm. For example, a sale has been readily agreed by Killens for an establishment near Frome, comprising a bungalow, stabling for 20 horses, an indoor arena and about 20 acres. Demand remains for paddocks with stabling, although the level of demand may have cooled a little.

Buying land can be a dilemma. As agents, we are always keen to state that “this is a one-off opportunity” and this can encourage many buyers to go that little bit further, whether it be for a farm, block of land or paddock. I suspect that many agents would find it difficult to think of anyone who has ever regretted buying.

So the future looks uncertain for rural property, and that is inevitable with the current economic situation, but it is not all doom and gloom. Demand remains and good prices are being achieved. Those selling need to be realistic in their expectations and show a willingness to negotiate, while those looking to buy should take care and do their research, but should not be deterred from investing in what may prove to be a good and secure long-term investment.

Published in the Western Daily Press