Flying against the trend of other property sectors, agricultural land is enjoying its most buoyant and bullish market for years.
Low interest rates, weak sterling and a much devalued green pound, as well as unexpectedly generous prices and subsidies, have boosted incomes and spending power.
The latest issue of the journal Farmland Market* records that between January 1992 and July 1994 the green pound was devalued 18 times, pushing up UK farm support prices by almost 30%.
Farmers are driving the land market, and the strongest values come from neighbours competing to expand. The national benchmark for average quality arable land appears to be around £2,000 per acre (£4,942 per ha), perhaps 30% higher than a year earlier.
Chartered surveyors, contributing to a “regional round-up” in Farmland Market, are enjoying the fruits of farming prosperity, particularly in the arable sector as a result of area payments.
“Sale figures achieved well over initial guide prices, resulting in values of at least 15% more than could have been expected at the beginning of the year,” says Richard Sharland of Woolley & Wallis, operating in Hampshire and Wiltshire. “Where there is interest from neighbouring farmers, a premium of up to £400 per acre (£988 per ha) has been paid.”
“Demand will continue to be fierce,” says Andrew Kennedy, of Clegg Kennedy Drew, in Lincolnshire and Leicestershire. “The market can undoubtedly handle extra arable acres.”
The Welsh market is, however, less secure. “The general impression is of a picture depending on facilities, location and quota,” says Edward Perkins of John Francis Halifax, who reports West Wales dairy units selling for between £2,000 and £2,800 per acre (£4,942-£6,919 per ha).
In contrast, dairy farms of 100 to 150 acres (40-60ha), with quota, can make more than £6,000 per acre (£14,826 per ha) in parts of Shropshire and Cheshire, according to Alan Lane of Frank R Marshall & Co. “Non-dairy farms have made up to £4,500 per acre £11,120 per ha),” he reports.
The six-monthly median for whole farms sold at auction, recorded by the Oxford Institute/ Savills series for Farmland Market, stands at £2,930 per acre (£7,240 per ha) for the first half of this year. It marks an increase of one-third over the December figure, but is similar to the same period last year. Bare land averaged £2,185 per acre (£5,399 per ha), up 9% on both a year earlier and on the December results.
The highest increases were seen in the North of England, in the 200 to 249 acre (80-99ha) size category. The latest figures are compiled from 169 auction reports throughout England and Wales, covering 18,259 acres (7,389ha).
Looking at the latest Farmland Market reports, RICS rural property spokesman Martin Lowry said: “The UK agricultural land market is far and away the most dynamic of all the property sectors. High commodity prices and assured EU support have combined to make agriculture a profitable business . . . it is no surprise that prices are shooting up.”
Lowry nevertheless urges the farming community not to get over-confident: “We have all seen in the housing and commercial property markets how fortunes can change.” His view ties in with Farmland Market’s land price forecasting model, which projects increases well above the rate of inflation this year, but warns that the market is precarious.
Apart from political and financial criteria, Lowry points to environmental constraints faced by farmers. “The agriculture industry is going to have to adjust to the fact that such schemes will have a mainly negative impact on the balance sheet. Above all, funding arrangements must be properly structured and sustainable.”
*Farmland Market is published twice a year by Farmers Weekly, Quadrant House, The Quadrant, Sutton, Surrey Sm2
