The Farmland Market

It was always said that the usual economics of supply and demand would come to the fore with regard to increasing land values but this has not proved to be the case in recent times.

The supply of farmland coming to the open market in the South West has dwindled with recent research stating that some 16% less is on the market compared with the same period in 2017. In historic context this is some 26% below the 10 year average.

The lack of land coming to the open market is, of course, due to the impact of the uncertainty surrounding the Brexit process. Although the DEFRA minister, Michael Gove, has consistently repeated his support for farmers albeit with an increasing focus on the delivery of environmental benefits, he has provided little detail to back this up. This uncertainty limits the likelihood of a large amount of land coming to the open market unless a significant number of farmers exit the industry because of Brexit. A short term exit from the industry seems unlikely as

many farmers advocated leaving the European Union and, indeed, some sort of financial support is likely to remain in place for in the short term at least.

Low interest rates have enabled the agricultural industry to remain in place with the low transaction volumes of recent years being seen against the majority of farmers sitting on an asset that has greatly increased in value since it was either purchased or inherited.

A number of factors are helping to support the market with the decline in Sterling and favourable economic conditions continuing to underpin farm gate prices for most agricultural commodities.

It is also the case that large infrastructure projects such as HS2 together with the increased interest

from developers for strategic land for development, is helping to boost competition for the limited amount of agricultural land currently available. A large number of farmers or land owners who have sold land or had it compulsory purchased for development are looking for alternative property in specific areas.

Recent research continues to reveal muted pricing across all land types with values down some 2.2% in the year to date with the current average value of £7,300 for all types of agricultural land with the average price for prime arable being in the region of £8,900 per acre.

It is certainly noticeable that buyers are becoming ever more discerning and looking into every aspect of a purchase prior to committing themselves. The ongoing challenges of Brexit as mentioned above will come into play, however the majority of land sales are being driven by neighbouring competition and, if that competition is not there, some land parcels will be extremely difficult to sell unless very realistically priced towards the lower end of the average value.

The current uncertainty, both in the political and economic market place, continues to drive land sales and with the lack of clarity over post Brexit trade arrangement still lacking, this will further inhibit matters.

Matthew Peters Partner

01452 880184 matthew.peters@brutonknowles.co.uk