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Farm profitability has hit land market, says report

Rapeseed fields between Seething and Halesworth, May 2015. Picture: Mike Page

Rapeseed fields between Seething and Halesworth, May 2015. Picture: Mike Page

Mike Page

Rural property agents said almost 30pc less farmland has been marketed so far this year compared to the same period of 2015, with farm profitability - rather than Brexit - thought to be the critical factor.

The analysis of Strutt & Parker’s farmland database shows farmer buyers accounted for less than half of land transactions during the first three quarters of 2016, with private and institutional investors playing a growing role in the market.

But farmer buyers are still the dominant group in East Anglia, where more land was sold below the guide price compared to the national average.

Michael Fiddes, head of 
estates and farm agency for Strutt & Parker, said: “Agriculture has been going through a very difficult time with lower commodity prices putting severe pressure on cashflow and profitability. As a result, farmers’ ability to service the debt needed to acquire land has become more challenged.

“Three months after the EU referendum result, it is still too soon to say what the effect on farmland values has been. While Q3 saw a 7pc drop in arable land values compared with Q2, the majority of the land exchanged over the past three months was under offer prior to 23 June.

“The Brexit debate has contributed to a slowdown in the amount of land coming forward – about 30pc less has come to the market in 2016 compared with the same period in 2015 – but there is no real evidence of deals falling through as a consequence of the ‘Leave’ vote. We will have to wait a while longer before we can assess the full impact.

“While land is still selling in the East of England, probably half is selling below the guide price, which is a higher proportion than in the rest of the country. This probably reflects the dominance of farmer buyers in the Eastern counties. How well something sells is much more to do with geography and whether there is a local demand than the quality of the land.”

During the final quarter of the year, Mr Fiddes said he expected to see more land coming to the market than during the last three months of previous years.

“There is evidence that sellers who have waited to see the impact of Brexit on values are now feeling sufficiently confident to proceed – even if some are choosing to market privately, rather than launch their farms publicly,” he said.

Strutt and Parker said the average price of farmland sold in England during the third quarter of 2016 was £9,300 per acre, compared to a market high of £10,700 per acre in the second quarter of 2015.

Is your farm business expanding through land purchases? Contact chris.hill@archant.co.uk.

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