Prime farmland is still in demand - and they’re not making any more of it
- Credit: Arnolds Keys
Despite the economic turmoil brought on by the coronavirus pandemic, good quality agricultural land remains a sought-after commodity says Simon Evans, agricultural partner at Arnolds Keys - Irelands Agricultural.
In times of economic turmoil – and they don’t come much more tumultuous than right now – investors will always seek safe homes for their cash.
And that invariably means seeking out commodities which are limited in supply, and which cannot be wiped out by the stroke of a computer key or the vagaries of a fickle market.
It is why gold is always seen as a safe haven in times of crisis. And it is why land, and in particular good quality agricultural land, will always be sought after, even in the toughest financial times. As the old saying goes, they’re not making land anymore, so its supply is by definition limited.
Figures published by Farmers Weekly show that across the UK, the amount of farming land currently on the market is down by a staggering 60pc against this time last year. Perhaps it’s a fear that they won’t gain the maximum value if they sell now, but potential vendors do seem to be sitting tight and waiting to see if the current choppy waters become a little calmer.
Small wonder that when prime agricultural land does come onto the market, buyers are competing with each other to snap it up – with a healthy effect on prices. You might think that with the triple whammy of Brexit, Covid-19 and the change in the subsidy regime, the attraction of investing in farming land might have waned.
But not only is such land a safe investment, unlike gold it can also return a good ongoing yield – lockdown has demonstrated the need for self-sufficiency in food production, and Brexit may yet reinforce that imperative. And agricultural land continues at present to be a tax-efficient way of passing wealth through the generations.
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The fact that many farm businesses are family affairs means that such land only comes to the market rarely, generally only when no-one in the next generation is in a position to take it on. And when that does happen, there will be a number of potential buyers, from neighbouring farms with spare capacity in fixed equipment seeking to expand and increase efficiency, to those wanting to reinvest cash generated through the sale of agricultural land for development.
So there is a limited supply of prime farming land coming onto the market, and buoyant demand among potential buyers.
This imbalance between supply and demand is strengthens prices, particularly for Grade 1 quality land; counter-intuitively, perhaps, this time of uncertainty and economic upheaval may be a good time for those who have been delaying a sale to bring their land to market.