Ten years ago, farmland was worth on average significantly below £5000 per acre but an improvement in farming fortunes and continued interest from non-farming buyers has seen values in the South West increase to anywhere between £7000 and £12000 per acre.
In England and Wales, according to surveys, prices achieved fell by 3% during 2017 but results from the first quarter of 2018 indicate a slight increase of 0.4%. With variations in location and quality, it can not be concluded that the market is improving and it is probably the case that it is holding steady.
With turbulent agricultural commodity prices and increased uncertainty regarding Government support for agriculture, prices are being maintained through an ongoing lack of supply at a time when some lucky landowners with rollover funds are keen to buy. There are benefits to holding land – it is a tax efficient way of passing on wealth - and potential purchasers recognise this.
It seems that there is firmer demand for higher quality land in good locations while market conditions for more remote lower grade farmland can be more challenging. Location is important to the non-farming buyer but it seems that these buyers are being more cautious and are less active in the market.
Looking forward, ahead of Brexit in March 2019, uncertainty around future trading relationships and agricultural support mechanisms as well as the possible impact on the economy as a whole is likely to affect certainty, confidence and investment. Interest rates could be a factor but it seems that the utterances from the Governor of the Bank of England regarding future interest rate rises are more reassuring than his thoughts on the possibility of a no deal Brexit. It is likely that the availability of land will remain constrained as landowners look to ride the changes and prices will stay steady as a consequence.
Looking to sell land in 2018 or 2019? Contact us to discuss the options.