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Property Market Report January 2007
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Property Market Report | Agricultural land and property |
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Agricultural land and property Contents Value of equipped land with vacant possession Value of equipped land subject to tenancy Value of unequipped land with vacant possession Comparative values by region- arable farms Comparative values by region- dairy farms Comparative values by region- mixed farms Comparative values by region- hill farms Vacant possession value trends England and WalesThis report covers the six-month period between and 1 July 2006 and 1 January 2007. The second half of 2006 has seen significant price rises for the farm and rural land market in most of England And Wales. The problems surrounding the administration of the Single Payment Scheme (SPS) in England do not appear to have influenced the continuing high demand for farms and land, and are of little interest to non-farming purchasers. Although there was an increase in the supply of land on to the market, declining subsidy returns did not produce a greatly increased flow of land onto the market, and part of the increase in supply was thought to be due to a few large one-off sales. The market has accordingly shown some notable rises this year as a result of continued imbalance of supply and demand and interest from non-farmers who make up around 50% of the purchaser market. The 2006 year has also shown strong bidding from overseas buyers, particularly Danes and Irish who can buy a lot more UK land for the same money than at home. The continued robust housing market has influenced equipped farm values with significant rises in farmhouse values but also buildings with any prospect of conversion. A substantial amount of the widely reported recent high earnings in the City of London have certainly been recycled into farms and land, as they are an investment seen to provide good capital security and growth, tax advantages and a sought after lifestyle. With press reports of 3,000-4,000 people in the City earning bonuses of at least £1m in 2006, there is a great deal of money chasing a fixed stock of country residential property, particularly within travelling distance of London. There has also been a recovery in product prices for farmers-feed wheat is now selling for around £90/t whereas in January 2005 it was making around £65/t . This has partly been on the back of the big rise in interest in using crops for processing into biofuels. There is an expectation of a rise in demand for land as a resource for renewable energy projects, as a result of the need to respond to climate change. Returns from beef production have improved, but sheep farms have done less well and dairy producers continue to struggle with the low milk price. Overall farming confidence has however improved. Local District Valuers are reporting rises in value for land and farms in the majority of areas, significantly so in those parts of the country with high amenity value. While the commercial farming areas of the East of England and adjacent parts of Yorkshire and Humberside have shown a lower level of rises, the overall picture is of a very strong market. What appears to have happened in 2006, all at the same time, is that already high demand and low supply have been further pressured by improved farmer optimism, city bonuses, overseas buyers and the renewable energy angle. It is difficult to recall a time in recent years when so many factors with a positive effect on price have all occurred at the same point. There appears to be a new realisation that farms and rural land are a class of investment that should be considered by a far wider range of investors than was previously the case. Land has proved over recent years to be a secure investment, is tangible in nature and which combines the ability to be used for farming or country pursuits, while being capable of being enjoyed, particularly with a house, for its own sake. The recent rises in interest rates should begin to moderate the rate of price rises in the housing market in general. But with the amount of personal wealth currently in the system it remains to be seen how far any slow down will affect prices, in view of the relatively low supply of rural property available. North WestAgain in the north of the region relatively few sales have taken place especially with regard to commercially farmed units, however activity in the land market has picked up with good prices being achieved for all types of land. There have been some commercial farm sales, in the last 6 months these have been most notably in the Cumbria and Cheshire areas. It would appear that the SFS difficulties with payments and ongoing problems with the system generally, has had no significant impact on agricultural sales, however this said, the demand for land remains high scarcity driving up values in some cases and smaller parcels of land often attract bids from those not concerned about SFS payments. Non-agricultural purchasers continue to dominate the market for small blocks of land, keeping land prices fairly stable. At the time of writing there seem to be fewer farms coming on to the market, however this is a traditionally a quieter period generally with regard to farm sales. Notwithstanding this, demand for farms is still strong with many farmers selling up in Ireland and looking to purchase farms in South West Scotland and this demand is rippling down into North Cumbria, keeping prices high. In Lancashire the market remains strong with particular demand for land driving prices up with some high prices achieved even for lower quality grassland. The increase in advertised land seen in the first half of the year has stabilised and the level of supply now appears to be fairly constant. Sales of small blocks of bare land are again a dominating feature of the sales recorded, with demand still high from non-farming buyers, keeping prices high. This trend is reflected in the Cumbrian market with small blocks of accommodation land currently achieving high prices with plenty of local demand. As the residential market continues to be buoyant, farmhouse prices have remained high, with lotting of smaller previously commercial farms still the norm, especially in popular locations to achieve the higher prices for the dwelling and/or traditional barns, demand still outstrips supply for these types of property especially in the Cumbria area. In Cheshire and its immediate borders with North Shropshire and North Staffordshire a string of five good sized dairy farms went to the market by auction in the report period. Four sold, the results being given below and in the West Midlands report. Irish farmers were involved in the bidding and purchased one of the units. All went for good prices, substantially over the guide price in several cases. The levels of value indicated by the results of these auctions bear little relation to current levels of profitability in the dairy sector. The one farm which failed to sell at auction was in a less attractive urban fringe location. A combination of overseas money, together with a reluctance on the part of those giving up dairying to sell their land, is thought to have driven prices up substantially.
Auction Sales include:
The market remains relatively quiet with prices tending to strengthen. There has been some increase in the number of holdings advertised, and some interesting farms are currently available with sales keenly awaited. It is believed that there have been some private deals struck “off market” where buyers and sellers have been introduced at acceptable figures cutting out the marketing process. The region is one where auction sales are infrequent, so the auction of land in Co. Durham & Tyne & Wear offered by UK Coal has produced some welcome evidence with good prices being achieved for mostly ex-opencast land. 11 of the 14 lots sold. Demand for steadings for conversion remains strong particularly in those areas which have a no new build planning policy. Non-farming money continues to be a significant factor in the market.
Yorkshire and HumbersideThe farming sector in general has seen an increase in the price of its commodities, in particular combinable crops for the 2006 harvest. Though this has been largely due to failures elsewhere in the world, there is a degree of optimism that has been missing for some time. In the East Riding there have not been a sufficient number of transactions of equipped holdings in the last six months to draw reliable definitive market conclusions from. There remains an absence of sizeable good quality easily worked productive land being released on to the market and it is therefore not possible to derive a robust trend. Farmers are tending to dispose of fragmented, isolated and poorer land but price depends on the demand from adjoining owners for the most part. Investment yields have been driven down as the single subsidy basis shifts value from the freeholder to the tenant. In conclusion, the land market in areas still dominated by farmers generally is in a state of flux and taking all factors in to account it may be the long term before the market regains genuine stability. In North Yorkshire and the Vale of York, with better commodity prices there appears to be increased optimism within the farming community and they are back in the market. This has put further pressure on the limited supply, particularly of complete units, and the inbalance between supply and demand has resulted in increased prices. In North and North East Lincolnshire whilst farming profits have improved. values overall continue to lag behind East Riding Wold levels. The demand falls well short of North Bank levels. Poorer land remains difficult to sell. In South and West Yorkshire, demand for land in this substantially more urbanised area is greater than in a more rural area and prices reflect this. Non agricultural buyers are in the market and this increases the demand on the restricted supply. Auction sales include:
The evidence indicates that the market for farmland in the East Midlands has remained extremely buoyant and prices have reflected the continuing demand from farmers, “lifestyle” purchasers and investors.Most commodity prices have moved off their former depressed levels but dairying still remains an uncertain business. However, there is also optimism that the “bio-fuel” trade will provide a support mechanism for the arable producer.Despite the Antrobus 2 and McKenna cases raising questions about the Inheritance Tax treatment of agricultural property there still remain significant tax advantages in holding on to “working” farms. Notwithstanding the length of time it has taken to establish SPS entitlements, the right to continue receiving these payments is also a considerable attraction when looking at agricultural land as an investment.Furthermore, the availability of roll-over relief from development land sales has also influenced the purchase of several large farms in this area and this is continuing to be apparent in some transactions.Lotting to maximise value remains essential with some properties, particularly where ‘paddock’ values can be achieved, which continue to outpace most peoples expectations. Potential foreign buyers are also a factor to consider when marketing a property, especially the more “commercial” farms.Although interest rates have increased recently, there seems to be little sign of any slow down in the market and there is rather more optimism for the future than has been evident for some time. The following sales illustrate the auction prices achieved over the reporting period:-
The second half of 2006 was a very active period in the region. A number of good sized whole farms were brought to the market by both auction and private treaty, and sales acheived by both methods showed sigificant rises in values, with guide prices exceeded by some margin. Farms of 175-300 acres that 12-18 months ago were selling for £1-1.25 million are now easily realising over £1.5 million and towards £2 million in some cases. Bare land is now often making £4,000 per acre or more, even without Single Payment Scheme entitlements. The reasons behind these rises in value are thought to be the pent up demand in the market which built up over the implementation period of the SPS, non-farming buyers and the recent appearance of overseas purchasers. Irish farmer buyers have been active in the region in bidding for whole farms, and have purchased several commercial units. Despite the continuing low farm gate price of milk, well equipped dairy farms have sold well, mainly to those who have decided to stay in milk production by cutting costs, by investing in more efficient production set-ups. Amenity and residential purchasers remain active in the market. Where a farm with residential and equestrian potential is offered in an area of high landscape value, such as the Shropshire Hills, the non-farming interest is very keen. The resulting price paid now bears no relation to the farming quality of the property, any farming bidders who were interested having been priced out of the sale. Small farms remain in strong demand from residential purchasers, as shown by the auction results below. Parcels of land on the fringes of towns and villages continue to attract the bids of investors and speculators, with high prices as a result. The accessible location of much of the region's farmland means it is an attractive place for those with surplus funds, who are looking for a secure property investment that is currently performing very well.
Auction sales include:
In the Counties of Essex, Hertfordshire and most of Bedfordshire, the market remains dominated by lifestyle and amenity buyers, given the proximity of London. Any property with a good house attracts strong bidding, often from those with City bonuses, leading to sharply increased prices. Small areas of land continue to be in small demand from amenity, equestrian and residential purchasers. In Cambridgeshire and the Fens the significant rise in farm commodity prices this year has lead to a much more confident farming industry, further buoyed by government backing for energy crop production and recent industry commitments to the construction of large scale bio-diesel and bio-ethanol plants around the country. Sales in the commercial farming areas of the Fens have started to respond, and sales are showing little difference between land with and without entitlements, given the availability of entitlements at low prices on the open market. In the rest of the county, the amenity and lifestyle market dominates, but again values have moved upwards, even given the much greater supply of land coming to the market.
The market in Suffolk over the last 6 months is still dominated by private sales of small/modest blocks of land often reflecting some amenity value. Bare Grade 3 agricultural land has crossed the £3,000 per acre benchmark, with the odd sale nudging £4,000 per acre. Thereare a small number of whole farm Units currently on offer. Theberton Hall Farm was guided at £1,750,000, comprising a modern 3 bed house, 2 bed annexe, buildings, 265 acres of light land with irrigation, 83 acres of grass and marsh (in ESA) and 88 acres of mainly woodland (within woodland grant scheme). The holding included SPS entitlement and is understood to have sold for well in excess of the guide, to a non-farmer, looking to contract farm the land. The market in Norfolk has been less active with relatively little land being offered for sale. The interest of Danish buyers has been notable, as they seek to purchase land in East Anglia at UK values that are very much lower than those in their homeland. Two significant investment holdings have come to the market in the last quarter of 2006. Feltwell Fen Farms’ 2,700 acres on the Norfolk/Cambs border has been guided at £9.5 million and a sale of a 950 acre investment farm in the Cambridgeshire Fens is understood to have been completed this Autumn for around £1.9 million, showing a return on the rent of 3.5%.
Auction sales include:
In Kent there have been few sales of material size on the open market and almost all were sold by private treaty or tender. About 585 acres of mainly Grade 3 bare land with a grainstore is understood to have been sold in 3 lots in excess of the £3,000 per acre guide. Currently 177 acres mainly Grade 3 on top of the North Downs near Sittingbourne is being offered for sale by tender in 8 lots at guide prices in the range £2,650 to £4,500 per acre. In Sussex there have been very few transactions in the area of any sizeable holdings and the market is still dominated by non farmers purchasing for lifestyle reasons, attracted to smaller holdings of less than 50 acres with neighbouring owners taking larger acreages, particularly on the coastal strip. The character of the ‘farmhouse’ still dictates the price. ‘London money’ is in evidence. The attractively located Old House Farm, Peasmarsh near Rye, a former Crown Estate farm, extending to 632 acres with a period 6 bedroom period farmhouse, 3 cottages and a comprehensive range of buildings and has been sold at a figure believed to be well above the £2.75m guide price. In Hampshire demand for agricultural land remains strong, but the underlying reasons for ownership extend well beyond farming of productive units. Small areas continue to attract interest for equestrian use, linked with investment and ‘ lifestyle ‘ interests. For areas up to 25 acres, sales have taken place in Hampshire from £ 6000 – £ 28,000 per acre.A significant sale of 1,800 acres of good farmland near Stockbridge in 11 Lots was agreed in December. Well equipped farms with dwellings are being sold at a figure in excess of £ 5,500 per acre. Full details of the sale have not yet been released. Uncertainties concerning European Agricultural policy remain, with the possible phased withdrawal of Payment support within the next six years. Agricultural land still retains favourable tax and Inheritance Tax benefits in an unpredictable wider investment market. Auctions sales include:
Across the South West supply has remained relatively low which has met keen demand and prices have remained strong and buoyant, commonly resulting in higher values for farmland with farms sold often exceeding guide prices. This trend is seen as farmers are sitting tight on their properties rather than moving to larger properties with farms more commonly appearing on the market when farmers decide to retire. A Devon agent reports having sold around 20 farms this year 79% were sold to previous non-farming buyers with deep pockets and non farming income. The top end of the market is often driven by capital tax motivations in conjunction with land speculation and investment security objectives, these compete against and often outbid commercial farmers, the lower end continues to remain distorted typically £50,000 or less) by non-agricultural buyers often purchasing for equestrian, recreation, amenity or conservation uses. Whilst non farming buyers continue to uphold values it is increasingly noticeable that farmers are acquiring blocks of bare accommodation land where able, to expand their existing land holdings locally often prepared to pay in excess of £4,000 per acre. Whilst this is in excess of their pure value as farmland, farmers are buoyed by the increase in commodity values such as wheat prices having increased 50% since harvest.
Auction results include:-
This report period has seen several whole farms sold by public auction, with the results given in the table below. Keen local bidding was reported for Gilfach Dafydd near Llandysul, the farm being purchased by a local buyer. Lot 1, the main house and 78 acres at Abertrinant near Aberystwyth made £675,000, well above its £600,000 guide. Farmers purchasing for their own occupation remain key players, but non farming money from both inside Wales and across the border is also very evident. Irish bidders were reported to be interested in the farms sold at Auction in Pembrokeshire, particularly Porthclais Farm at St Davids with its tourism element and proximity to the Fishguard ferry terminal. The ability of the market to breach the £4,000 per acre barrier for bare land noted in the last report is now being regularly seen and the demand for smaller areas up to 30/40 acres remains extremely high. Demand for pony paddocks and other small areas still remains very bouyant, as does that for small farms suitable for residential purchasers. Overall the picture is one of high demand and limited supply leading to rising values, significantly so in some cases. Auction sales include.
Sales of tenanted farms 2006 Demand for land and farms let on 1986 Agricultural Holdings Act tenancies has remained keen in the last 6 months of 2006. A number of auction sales of blocks of bare land have been held in the East Midlands and North East, details being given in the regional reports above. The two blocks of grassland extending to 102.68 acres sold by UK Coal in November at Lanchester, Durham achieved £195,000 which equates to a yield of 2.63% on the rent. The sale devalues to £1,899 per acre. A 65.26 acre block of let arable land sold in September in Derbyshire and made £1,655 per acre but some of the boundaries were unmarked following it being farmed in conjunction with other land. A sale of a 950 acre investment farm in the Cambridgeshire Fens is understood to have been completed this Autumn for around £1.9 million, showing a return on the rent of 3.5%. The farm comprises an arable all Grade 1 soils unit with modern buildings including potato stores. There is a 3 bedroom house (subject to AOC) and 2 other 3 bedroom cottages and a 3 bedroom bungalow. This sale is an example of a more commercial agricultural investment property.
Agricultural Holdings Act 1986 Tenancies Again relatively little activity reported concerning 1986 Act rent reviews. Agricultural Tenancies Act 1995, Farm Business Tenancies (FBTs) Rents for land on Farm Business Tenancies are reported to now be varying over a significant range. The availability of the Single Farm Payment, land quality and competition from tenants for the land can vary considerably and thus so do rents. Rents range from £20 and below per acre where no Single Payment entitlements are available, to £70-£75 per acre. Where good competition between potential tenants is present rents can even still make towards £100/acre in a few instances, particularly where a tenant can achieve substantial savings by taking on neighbouring ground.The availability of a good Single Payment history will enhance rents, but this element is now eroding fast in England as the transition to a wholly area based payment enters its 3rd year.Since the introduction of the Single Payment decoupled subsidies from production, FBT rents have become more sensitive to land quality, for example than was the case under the previous arable area aid system.Landlords now look at the total return receivable, in the West Midlands they will be looking to make up to £80 per acre in total for ground of decent quality, both rental from the tenant and Single Payment can vary as the components of that total.
Milk Quota Sales and Leasing (2006-2007 Season) Prices for milk quota have remained very low during the period, in July prices for sale continued their fall towards 2p per litre and by mid August had fallen to 1.9p per litre, where they stayed apart from a minimal recovery back to 2p per litre towards the end of 2006. Prices of quota to lease similarly remained on the floor at around 0.2p per litre. Reduced national production and continuing low milk prices explain in turn why quota values are so low. Some commentators have claimed so many producers are quitting the industry that the UK could be importing fresh milk within 5 years, however the relative amount of milk that goes into processing is thought to make this unlikely. The EU Farm Commissioner has confirmed the abolition of milk quotas by 2015, the intention being a gradual phasing out. SINGLE FARM PAYMENT ENTITLEMENT SALES Only limited public sales have been reported during the report period of entitlements under the Single Payment Scheme. The level of value based upon a 1.5-2x multiplier of the annual payment provided by the entitlement reported in early 2006 seems to have been repeated. Again it is clear is that the amount of variation between entitlements means that each sale has to be looked at on an individual basis. An auction of standard Welsh entitlements held on the borders at Kington, Herefordshire resulted in multipliers ranging from 1.81 to 2.26 their annual value in December. The fixed historic element of Welsh entitlements, together with the lack of an 'area' route into the payment system is thought to mean a higher demand for Welsh entitlements when compared to the position in England. Reports continue of farmers paying other land managers to take set aside entitlements off their hands, with significant figures on a per hectare basis being paid, albeit for small areas. There is a recognisable trend across the country with an increased number of farms coming on the market although the amount of land sold still remains well below the level of 5 or 6 years ago. Land values are rising and there are indications of an increased confidence in agriculture. The influence of the residential market remains strong with houses, cottages, steadings for development and hope value playing a large part in many sales. In the southwest pressures on the margins in the dairy sector continue but farm land values are under-pinned on the back of bidders from Northern Ireland who find land in Scotland relatively cheap and close to hand. In the northeast, a supply of reasonable quality farms and unequipped land has been offered for sale emphasising agricultural rather than residential quality. The market for bare land is strong with very small parcels fetching in excess of £5,000/acre but larger areas making barely half this amount. All areas report no increase in the supply of land to let. Demand for crofting tenancies remains high despite the level of agricultural activity decreasing significantly in recent years. Residential considerations have become of prior and increasing importance in many areas. Recent legislation envisages the creation of new crofts and more action against absentees. The croft house grant scheme (CHGS), which replaced CBGLS in 2005, continues support for the building of new homes with grants of up to £22,000.
Value of equipped land with vacant possession as at 1 January 2007 The table below shows average values for different types of equipped land in each region with values expressed in terms of £s per acre and per hectare. Dairy farm values exclude the value of milk quota. Where there is no entry the land type is not typical within the area.
Value of equipped land subject to tenancy as at 1 January 2007
Value of unequipped land with vacant possession as at 1 January 2007 The table below shows average values for different types of bare land in each region with values expressed in terms of £s per acre and per hectare. Dairy farm values exclude the value of milk quota. Where there is no entry the land type is not typical within the area.
The average values as at 1 January 2007 are presented in a graphical form for each of the four types of equipped farm with vacant posession. Comparative values by region- arable farms 
Comparative values by region- dairy farms  Comparative values by region- mixed farms 
Comparative values by region- hill farms Vacant possession value trends The graphs below indicate the trend of average vacant posession values reported by District Valuers since Spring 1988. From 1st April 2002 the series are based on slightly amended datapoints details of which are provided at the end of the report. England and Wales - equipped land
Scotland - equipped land
England and Wales - unequipped land
Scotland - unequipped land
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