Agricultural Land Market Survey

Agrigultural Land Market Survey
Great Diversity In Values

24 February 2016, by Ian Bailey

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



Key Facts

Forecasting future values for the farmland sales market is far from easy, particularly following a year when a wide range of sale prices were achieved.

Agricultural incomes are under pressure as some commodity prices are back to 2008/2010 levels. The key global forecasting organisations, including the FAO, USDA and IMF, have all cut their already pessimistic forecasts for commodity prices in the medium term to 2020. Lower energy and feed costs will partially offset lower output prices but the strong pound makes exports less competitive.

Debt may increase the number of farms coming to the market although if this is the case it is likely to be smaller farms that are most affected. Overall, we don’t expect supply to increase significantly unless there is a threat to direct farm subsidies from a UK exit from the European Union or a significant negative change in the capital tax treatment of farmland.

Both of these factors remain threats to watch but are currently unknown. Brexit could have a significant negative impact on farm incomes and land values, dependent on how the UK Government supports farming.

In 2015, our research recorded falls in arable land values in the eastern counties of England, where values have been highest. Grassland values, which have lagged behind arable values, have continued to increase. This land type is still regarded as good value by large livestock and dairy operators which are trying to expand to spread costs. This demand will help support prices in this segment of the market.

Localised demand

In the short term, demand for farmland will be more localised, with areas of strong and weak demand, often within a few miles of each other.

Top-performing farmers will continue to be in the market for the right opportunities. Non-farmer demand and the expected growth in prime country residential markets over the next five years will continue to support prices especially on residential and amenity-type farms, but investor demand may weaken as the performance of alternative assets improves.

An increase in buyers with rollover cash is likely to follow increased development activity and will add to the mix of local demand.

Downgraded forecast

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.

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 sales fail to reach expectations as illustrated in Figure 6. These market conditions are likely to last three to four years until commodity prices start to recover, following stronger global growth.

However, 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 value growth in the long term.


Farmland value forecasts

Figure 6

Source: Savills Research


■ Residential/Amenity farms

These may offer opportunities as the economy improves, especially where they are recognised as good value compared to arable land and where improvements will enhance future value.

■ Mixed rural estates

These remain attractive to high net worth buyers as safe shelters for wealth that they can also enjoy; they are also partially protected from commodity price volatility being diverse in their sources of income generation.

■ Commercial farms

These offer the opportunity for top-quartile income potential whilst being a tax-efficient asset for the transfer of wealth, especially for farms in Scotland where values are more affordable compared with areas south of the border.


Key Contacts

Ian Bailey

Ian Bailey

Rural Research

Head Office London

+44 (0) 20 7299 3099


Alex Lawson

Alex Lawson

National Farms and Estates

Head Office London

+44 (0) 20 7409 8882


Subscribe to Savills research


Would you like to be notified via email about new research?