Market in Minutes:
Farmland Market

MIM: Farmland Market Q3
Farmland Market Q3 2016

4 November 2016, words by Ian Bailey

Farmland market activity and values updated to Q3 2016

■ Average values of prime arable land fell by 2.5% in England to £9,360 per acre.

■ Scottish and Welsh values of prime arable land have remained stable at £7,940 and £7,500 per acre respectively.

■ Supply in the amount of farmland markets compared to 2015 has increased across Great Britain by 3%.

■ The supply in farmland in England decreased by 1%, however in Scotland and Wales increased by 4% and 43% respectively.

 

■ Forecasts are for average values to remain static given the currency play and traditional reasons for owning land still exist.

FIGURE 1

Supply 2016 (to end Sept)

Change in amount of farmland marketed compared with 2015 (to end Sept)

 
Figure 1

Source: Savills Research

FIGURE 2

Farmland Values – 2016 (to end Sept)

Average value of prime arable land

 
Figure 2

Source: Savills Research

Supply

■ Overall there was no rush of land to the market but September recorded a significant increase of activity compared with the two previous years (see Figure 3). However, this increased activity was mainly located across Wales and South West England.

■ Across GB supply in the first three quarters of 2016 was just 3% higher than the same period of 2015 at 162,400 acres which is the highest level since 2008 when 170,800 acres were advertised. This is still short of the annual average of 10 years to 2008 of 181,500 acres.

■ Across England supply fell slightly (-1%) to 108,500 acres – across the regions:

► Reduced activity concentrated down the eastern regions: East Mids (-8% at 16,150 acres), East of England (-12% at 16,800).

■ Savills Research shows that 40,000 acres were publicly marketed in Scotland in the first nine months of 2016, a rise of 4% on the same period of 2015.

■ While supply in Scotland has increased, it remains at historically low levels and this factor, along with the comparatively good value for money, is continuing to support prices.

■ Wales recorded a 43% increase in supply during the first nine months of this year to 14,000 acres.

FIGURE 3

Q3 supply across Great Britain

 
Figure 3

Source: Savills Research

Values

■ Muted pressure on land value growth continued into Q3 2016 with average values of ‘all types’ of farmland across Great Britain falling -0.8% recording a total fall to date in 2016 of -2.3%. But regional variations in values have never been greater with markets increasingly localised.

■ The fall in values continues to be principally driven by pressure on arable land values with the East of England and South East England recording average falls of around -2.5% to -3% during Q3 and total falls of -3.6% to -7% since last December in this sector.

■ There is now evidence of pressure on grassland values, but it is not as significant as for arable land.

■ Low commodity prices and patchy local demand are the principal factors affecting the land market. The prospect of a significant increase in farm subsidies this year due to the weak pound and higher commodity prices may help support land values in the short term. The weak pound also benefits diversified income streams such as tourism. In addition overseas buyers can take advantage of the currency play.


BREXIT

Our forecast on farmland values

In the short term, there are factors that suggest the additional downside (over and above our current forecasts) of Brexit on farmland values may be muted. Agriculture tends to do well in time of economic uncertainty. In addition, the weak pound creates opportunities for overseas buyers. Both of these factors, along with the anticipated reduced supply, may help support farmland values.

 

 

 


Regional Commentary

England – Alex Lawson

In a discerning market, still relatively short of supply, pricing remains critical and competition is often the key to achieving the right sale result. Continuing pressure on commodity prices and profitability has constrained activity in the predominantly arable eastern regions, while the amount of land offered in the south west has increased. A handful of large farm/estate launches this Autumn have attracted numerous and varied potential buyers; affirming a healthy appetite for the best properties.

Scotland – Charles Dudgeon

In contrast with England, supply of farmland has increased in Scotland this year, boosted by increased certainty with regard to CAP, a favourable exchange rate and the opportunity to purchase more acres for less north of the border. Despite Brexit, and the ongoing debate around Scottish independence, commercial reality is continuing to drive demand, and value for money is trumping politics when it comes to buying decisions. Values are stabilising, with strong prices continuing to be paid for best in class.

Wales – Daniel Rees

2016 has been an eventful year with the lead up to the referendum and questions following the result. Despite this, we have experienced a successful year in farm and farmland agency in South Wales. Supply and buyer interest picked up after the referendum and, despite challenging farm commodity prices, we still saw plenty of buyers looking to expand their dairy operations. It is clear that there are plenty of active buyers out there for quality Welsh farms and land, and we are well placed to put them in touch with our clients.

 
 

Key contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Alex Lawson

Alex Lawson

Director
National Farms and Estates

Savills Margaret Street

+44 (0) 20 7409 8882

 

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