Farmland Market Proving Resilient, but Sales Taking Longer
A burst of activity in the farmland market since Christmas has reduced the backlog of land left on the market from 2016 – but demand for farms, and the prices paid for them, remains highly variable.
Fiddes, Head of Estates & Farm Agency for Strutt & Parker,
“The year 2017 started unusually. There was a significant carryover of land on the market – over 40% of the farms launched in 2016 were still available at the end of the year, which is a far higher proportion than we have seen before.
“However, there has been a flurry of activity since Christmas, so a considerable amount of this has now gone under offer. A quarter of the land launched in Q1 of 2017 also looks to have found a buyer.
“This is encouraging and suggests that buyers remain confident about land as a long-term investment, although it is now taking longer to get sales to the point of completion. Buyers are being more cautious than they were when there was greater competition in the marketplace.
“Our analysis also shows that over half of the livestock and residential farms put on the market last year are still available or have been withdrawn, which is a higher proportion than for other types of farms.”
Mr Fiddes said based on the transactions in Strutt & Parker’s Farmland Database, the average price of arable farmland sold in the first quarter was £9,800/acre. However, if you exclude three sales which took place under exceptional circumstances and achieved £15,000/acre, the average was £8,400/acre.
“However, prices remain highly variable,” said Mr Fiddes. “A better measure, that shows the variability that an average can hide, is that almost 40% of arable sales were for £6-8,000/acre, with most of the rest selling for over £10,000/acre.
“This highlights how polarised the market has become with strong prices still being achieved where there is both a committed buyer and a vendor with a farm that is attractive to the market.”
Looking at supply, there was a significant drop in land marketed in the first quarter, possibly due to some vendors delaying marketing to avoid the carryover from 2016 and due to more land than usual being marketed at the end of 2016.
Mr Fiddes said he expected supplies to ‘catch up’ later in the year, but based on his knowledge of what is going to be marketed in the coming months, levels were unlikely to exceed those seen in recent years.
“This is likely to support prices, although undoubtedly a wide range in values will continue to be achieved dependent on location.
“Farms are generally taking longer to sell and most prices have eased back from the highs of 2015 but overall the market remains pretty resilient given the uncertainties associated with Brexit.”
Estimated range in prices by region
Each quarter the Strutt & Parker regional agency team estimates the range of prices in their area.
The prices in the chart are for vacant arable and pasture land only (i.e. it excludes the value of houses or buildings). Bottom 25% means if 100 farms were valued, the price of the 25th farm from the bottom. The average is the 50th from the bottom (and 50th from the top).
“2017 started on a positive note with sales agreed on several offerings that had remained available during the second half of 2016. Buyers are now prepared to move forward, albeit paying prices which are typically 5% to 10% lower than a year ago. There are two commercial farms, a residential estate and several blocks of land due to come to the market this spring and we predict several more will be available by early summer.” Tim Fagan, Eastern Region
“Farms which were stuck on the market are now selling, but the period between exchange and completion is longer than it used to be. It feels like it could be a lean year for supply in the south west of England – only three farms have launched since the start of the year totalling 1,543 acres. The lack of supply could help to underpin values, although location will remain the key driver for the price paid.” Charlie Evans, South West Region
“The vast majority of sales that came on to the market towards the end of 2016 exchanged contracts during the first quarter of 2017. Some prices achieved were slightly lower than a year ago, but other sales have fared well, normally when in a sought after location. There are still some strong local buyers looking to enter the market if they spot the right opportunity; some are looking for livestock or dairy farms, but there is also demand for commercial arable units too.” Matthew Sudlow, West Midlands Region
“Smaller residential farm buyers are showing increased interest in the south east, with particular interest in the counties of West Sussex and Berkshire. Farmer buyers are tending to sit back, unless they are looking to roll-over funds from recent sales. Those who are buying are seeking for value for money. Arable prices are ranging between £7,500/acre and £12,000/acre.” Mark McAndrew, South East Region
“We are continuing to see demand for residential farms, or land which offers additional income potential with farms of 150-300 acres with a modest farmhouse topping buyers’ list of demands. There seem to be fewer purchasers out there which does mean less competition, but there is more and more rollover money in the region and also good quality diversified farm businesses looking for land to aid their expansion. The best arable land is still selling for around £10,000/acre.” Will Parry, Northern Region
“The supply of land has been tight in the first quarter of 2017, however, we have a number of farms which will be launched in the East Midlands shortly. Demand remains extremely location specific with strong prices still being paid for good arable blocks in accessible locations. Farmers continue to look to add to their existing holdings, with more upmarket areas of the region attracting non-farming buyers who are underpinning the higher prices in these areas.” Sam Holt, East Midlands Region