Farmland market remains steady

Lack of supply and ongoing demand helps to support market

FARMLAND PERFORMANCE

THE average value of bare agricultural land in England and Wales dipped slightly by 0.7 per cent in the second quarter of 2018, according to the Knight Frank Farmland Index.

The fall means prices have dropped by two per cent overall during the past 12 months and now average £7,175/acre.

Just as I said last quarter – when prices rose slightly – that it would be wrong to say we were witnessing the beginning of a price rally, it would be equally premature to assume that this latest quarterly dip automatically presages a more significant downturn.

As the Brexit saga continues we are in for an extended period of uncertainty.

The government’s new “Agricultural Bill”, which is due to be published, may offer some clarity, but the big outstanding question is what kind of trade deal the UK will be able to strike with the EU, our major trading partner for agricultural products by some way.

Several large farming estates, including the 2,177-acre Sutton Hall Estate near Woodbridge, Suffolk, have been launched over the past month or so, but overall there are few signs that the lack of supply that is helping to support values is abating.

By the end of June the amount of land advertised in Farmers Weekly had dropped by almost 20 per cent year-on-year.

However, according to our Farmland Index Survey, the lack of a willing successor is an increasing driver for the sale of farms.

Brexit could exacerbate this trend, but it could also act as the motivation for entrepreneurial young farmers to reshape the UK’s agricultural sector.

Debt as a reason to sell is also on the rise, although there is no widespread pressure from banks at the moment.

Aside from the ongoing lack of supply, rollover relief is one of the key drivers of demand, across the country, but particularly in areas seeing large amounts of development or infrastructure projects like HS2.

This will remain a factor for some time as demand continues to outstrip supply.

Average values, meanwhile, will become increasingly disparate, even at a very local level, as almost every sale is now to a “special” purchaser.

Andrew Shirley, Head of Rural Research

andrew.shirley@knightfrank.com