Property Update April 2023

PROPERTY UPDATE

APRIL

INTRODUCTION

Welcome to the Ceres Property Update, a publication that provides independent insights on rural property issues, from policy to administrative updates and key market information.

NAVIGATINGECOSYSTEM SERVICES

Whilst the knowledge that the natural environment provides us with services, including food, fuel, and shelter, has long been understood; recently the concepts of natural capital and ecosystem services have gathered momentum to value these various benefits. An ecosystem service is any positive benefit that we derive from natural capital, with examples including both biodiversity and carbon sequestration, but also access to green spaces and cultural connection. We can divide ecosystem services into different categories, such as provisioning, regulating and cultural.

The markets for ecosystem services in the regulating category is what is currently creating buzz. The markets for regulating services are all gathering pace at different speeds with carbon sequestration arguably the furthest along. However, from November 2023 it will be mandatory for developers to demonstrate a minimum 10% net gain on biodiversity. In practice, this means that where development destroys biodiversity (measured through habitats), it must be replaced, plus an extra 10% –known as Biodiversity Net Gain (BNG). The Environment Act 2021 sets out a mitigation hierarchy, which means creating BNG units onsite is the preference. However, BNG can also be delivered off-site, and it is this which is providing a market for habitat creation and enhancement.

Ceres Property is a market leader in Biodiversity Net Gain, and through our involvement on Natural England’s BNG Market Advisory Board, we anticipate that the market for BNG units will be via national marketing and localised private deals.

This month, we are launching a new marketing platform on the Ceres Property website to connect developers looking for units with landowners willing to provide them.

If BNG is something you are considering as a way to diversify your rural business, Ceres Property is able to undertake an initial assessment for free using Defra’s Future Farm Resilience Fund. Register your interest online here

PROPERTY MANAGEMENT

BUSINESS RATES

From 1 April 2023 the new rateable values take effect for non-domestic rates across England in Wales. These new rateable values are based on the open market rental value as at 1 April 2021 and will alter the previous valuation from 2015. Given the length of time since the last valuation, it is anticipated that there could be significant increase in business rates payable.

The amount of rates paid is impacted by the multiplier, set annually by central government. Despite the revaluation, the multiplier has remained unchanged since 2020. It will remain at 51.2p for the standard multiplier and 49.9p for small business multiplier going into the 2023-2024 tax year. With this increase in costs, on top of the loss of energy bills support from April 2023, businesses will feel even more squeezed.

It is therefore important to understand the available reliefs and exemptions. Whilst some of these reliefs and exemptions will be applied automatically, it is not always the case, so we recommend reviewing the bill when you receive it.

FARMLAND

MARKET

Whilst the economic turmoil of the recent months has disrupted markets globally, one asset class remains robust – farmland. The rising Bank of England base rate has increased the cost of borrowing. This, coupled with the cost of living crisis, means spending power is down, but demand for farmland assets remains strong.

Farmland has always been considered a safe investment, consistently demonstrating low but stable returns. However, it isn’t just the global economy which is keeping interest in farmland high; it is the impact of natural capital and ecosystem services. Investors see that farmland can offer more than food production, and the emerging markets for carbon credits, biodiversity units and water quality management, offer additional sources of capital and revenue growth.

RENEWABLES DIVERSIFICATION

With the recent increase in fuel costs, Ceres Property has seen renewed interest in renewable energy sources from on-farm generation right through to large scale developments.

Of particular interest is solar. Installing solar on roofs was a popular option for farmers when the Government’s Feed-in Tariff was available but after 2015, when the subsidies fell away, the cost of installation resulted in a low return on investment and the popularity dwindled. Nowadays, the technology in solar panels has improved, increasing their output and reducing their cost to a point where making the investment is stacking up again.

There are a number of steps involved in installing solar panels on farm buildings, although the ability to use permitted development in certain circumstances helps deliver these projects.

The government’s energy security strategy, published in April 2022, contained various measures to deal with the UK’s energy crisis and achieve its net-zero targets, including a pledge to ramp up solar power capacity from 14 gigawatts (GW) to 70GW by 2035. Although there is continued constraint with the grid, the delivery of large scale solar is something that is unlikely to go away in the near future.

Whilst solar is a great diversification option for landowners in these challenging times for agriculture, caution needs to be given to the type of developer delivering a solar scheme and ensuring they can suitably promote and deliver on their proposals.

GETIN TOUCH

IIf you would like to discuss any of the topics covered in this issue of the Property Update, do contact a member of the Team, or speak to the project leader, Peter Cole via the details adjacent.