Market Survey:

UK Agricultural Land 2016

UK Agricultural Land
UK Agricultural Land

24 February 2016, by Alex Lawson

An east-west divide in value growth has been created, in what was a mixed year for farmland

2015 was a year of change across the farmland markets of Great Britain. For the first time in a decade, price falls in arable land values were recorded in the eastern counties of England, according to the Savills Farmland Value Survey.

Grassland values, generally in the west, which have lagged behind arable values, have continued to increase. This has created an east–west divide (as illustrated by the map on Average Value Change) and also mirrors the contrasting supply dynamics, as noted on Supply and Demand 2015, which has also been a contributory factor to supporting values in the west.

 

Farmers made up 50% of farmland sellers last year – the highest proportion in seven years as low commodity prices and the short-term outlook for UK agriculture prompted some to capitalise on high average land values and retire.

Farmers made up the smallest proportion of buyers since 2003 – at 43% of all transactions. Meanwhile, non-farmers including lifestyle buyers, investors and institutional/ corporate buyers represented the biggest percentage of purchasers in the past 12 years.

Expansion of an existing holding was the principal motivation to buy, representing the predominant reason in more than half of all transactions, with three-quarters of those farmers who took on more land citing expansion as the reason to buy.

Just short of 176,500 acres of farmland were publicly marketed across Great Britain in 2015. This was an increase of 24%, or an additional 34,000 acres compared with 2014.

Across England, market activity increased by 16% to around 120,000 acres with a clear divide between the eastern and western regions. Increased supply was recorded in the eastern regions, most notably in the East Midlands.

In contrast, reduced supply was recorded down the western side of England. In Scotland market activity increased 47% in 2015, which may be the result of a combination of factors including pressure on farm incomes and some pent-up activity following a year of uncertainty caused by the Scottish Referendum.

Long-term investment

In the light of recent market evidence, the short to medium-term expectations for commodity prices and therefore farm profitability, we have downgraded our forecasts for the next five years (see Greater Diversity in Values). We expect values to be much more varied than in the past five years.

Exceptional prices may still be achieved if all the right factors come together, but conversely it is very likely that there will be more farms where potential sale prices fail to reach expectations or they fail to sell. We expect this market will last three to four years until commodity prices start to recover, following stronger global growth.

Farmland is a long-term investment and the fundamental factors supporting UK farmland value growth remain: supply is historically low, the product is finite, there are competing land uses and a variety of ownership motives will all support farmland values in the long term.

Articles from Market Survey: UK Agricultural Land 2016

Supply and Demand 2015

24 February 2016

Supply and Demand 2015

Analysis of farm transactions indicates that buyer and seller motives remained diverse in 2015

Average Value Change

24 February 2016

Average Value Change

Average values of ‘all types’ of farmland in England fell in the eastern regions and increased in the western regions

Great Diversity In Values

24 February 2016

Great Diversity In Values

Market evidence suggests that values will be more varied than in the previous five years

Global Market Tips

24 February 2016

Global Market Tips

Farming offers many routes for investment for those who are willing to roll the dice. Here we investigate four areas with potential

 
 

Key contacts

Alex Lawson

Alex Lawson

Director
National Farms and Estates

Savills Margaret Street

+44 (0) 20 7409 8882

 

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Julie Baxter

Julie Baxter

Data Administrator
Rural Research

Savills Margaret Street

+44 (0) 1483 203492

 

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