Residential Farmland Demand Still on the Slide
2009-07-22

According to the latest RICS Rural Market Survey, demand for commercial farmland rebounded during H1 2009, while residential farmland demand continued to fall sharply.

Commercial farmland prices have remained broadly flat during H1 2009 whereas farmland containing residential property has seen prices fall.

Surveyors are reporting that large scale commercial farmers are still keen to expand production, particularly onto neighbouring farms.

However, foreign demand, particularly from Irish farmers, is reported to have dried up.

On the residential side, life-style buyers continue to withdraw from the market, possibly because of jobs cuts and lower year end bonuses in the City.

Supply continued to fall sharply in both sectors indicating that neither commercial farmers or lifestyle owners are under sufficient financial pressure to sell.

As a result, commercial farmland prices (bare land) have remained broadly flat during H1 2009 whereas farmland containing residential property has seen prices fall.

Indeed, the RICS opinion based measure (which covers bare land) shows a relatively modest fall in farmland prices in H1 2009.

Arable land prices fell by 1% from £13,182 per hectare to £13,085 per hectare.

Pasture land prices fell by 2% from £11,490 per hectare to £11,260 per hectare in H1 2009.

The weighted average price of the two fell from £12,336 per hectare in H2 2008 to £12,172 in H1 2009 (a 1% fall).

The RICS transaction-based measure (which includes residential farmland) shows a larger fall in farmland prices.

On this measure the weighted average price of farmland fell from £16,342 to £15,114 (a 7.5% fall).

The larger falls in the transaction-based measure probably reflect the relative weakness of the residential farmland market compared to the commercial side.

Confidence in the price outlook turned positive in the non-residential sector, having been sharply negative during H2 2008.

In the residential sector, price expectations improved significantly from the extreme lows reached in the previous half year, but they remain slightly negative.

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