Rollover buyers keep UK farmland prices buoyant

A limited supply of properties and a strong interest from tax-driven investors are keeping valuations firm, according to Strutt & Parker.

Devon, England

A limited supply of properties and a strong interest from tax-driven investors are keeping valuations firm, according to Strutt & Parker.

Private investors and rollover buyers are dominating the property market, helping to keep farmland prices firm in the UK, estate agent Strutt & Parker found in its third-quarter report.

Rollover buyers needing to reinvest proceeds from residential and commercial land deals to avoid capital-gain tax liabilities have contributed to the average price of arable farmland increasing 5 percent quarter-on-quarter to reach £9,100 ($12,000; €10,200) per acre, the firm reckons.

“This change may not be statistically significant because of the relatively small amount of land which sells in each quarter […] but it does feel anecdotally as if prices have firmed in the past quarter for larger farms,” said Michael Fiddes, head of estates & farm agency.

Many of the rollover buyers are farmers, Strutt & Parker said, but they are funding their purchases from a development windfall, not their core business, which allows them to pay premium prices. Still, farmers account for fewer transactions than at the peak of the market in 2015.

According to the firm, the amount of rollover money circulating in the market is driving demand for larger commercial blocks of land, while lifestyle buyers are interested in large residential estates, which in many cases leads to premium prices.

Demand for smaller farms and blocks of farmland, however, are highly dependent on location and prices vary widely, Strutt & Parker said.

“Non-farming investors are driving the market in the north of England and most are looking for farms that have the potential for diversified income away from mainstream farming,” said Will Parry, Strutt & Parker partner for the north. The same dynamics prevail throughout most of the country, with perhaps the eastern counties being the exception.

Giles Allen, partner for the east, said “farmers remain a key force in the market – but at the right price.” But interest from City investors and rollover buyers is on the rise in this part of the country as well.

Overall, private investors are accounting for a greater share of farmland transactions. Transactions involving private investors have risen from 8 percent before the height of the financial crisis in 2008 to 20 percent in 2017, according to Strutt & Parker.