Less UK farmland was sold in the first half of 2016 compared with the same period in 2015, but sales grew slightly in the second quarter, according to a report by UK property agency Strutt & Parker.
The slowdown is part of an ongoing trend, and does not seem affected by Brexit. Between 2007 and 2014, at least 76 percent of marketed land was sold a year, but that dropped to below 50 percent last year.
Fifteen thousand acres have been sold so far this year, with private investors and buyers looking for roll-over capital increasing their activity in the market as farmers’ buying interest slows.
Investors bought a quarter of the land sold in 2015 and a third in 2016 to date. Strutt & Parker expects investor rather than farmer demand to support prices and contribute to 5 percent increases in prices from 2018 onwards.
“Farmer buyers now account for just under 50 percent of the market, the lowest level since we started tracking the market in 1996,” said Michael Fiddes, head of estates and farm agency at Strutt & Parker.
Overall, 25 percent less farmland was placed on the market than last year, 41,900 acres compared with 56,500 acres in the first half of 2015. Private investors have focused mainly on small farms in the southern half of England.
The strongest performing farmland is top quality arable land, with current prices level to those at the beginning of 2015. Pasture prices have also remained relatively stable, rising 2 percent since the first quarter but overall 5 percent lower than this time last year.
The report found that while overall prices were in line with 2015 slowdown trends, the range of prices has also risen. The top quartile of arable land has increased in price in the first quarter of 2016, by 8 percent in the South East and 18 percent in the South West. The bottom quartile of pastureland in the South West fell in value by 13 percent in the second quarter of 2016 compared with the first.
The report also forecasts “little change in prices in 2016 despite the continuing pressure on farm profitability due to low commodity prices and of course the uncertainty due to Brexit”.
“Well before the vote to leave the EU, the farmland market had started polarising – with some land still in strong demand and but other blocks struggling to sell and prices under pressure. The market will continue to be characterised by being very dependent on local demand,” the report concludes.
“The Brexit debate has contributed to a slowdown in the amount of land coming forward … but there is no real evidence of deals falling through as a consequence of the ‘leave’ vote,” said Fiddes.
Source: Strutt & Parker.
Source: Strutt & Parker.