Agricultural land and property

Contents

General Overview
North West

North East

Yorkshire and Humberside

East Midlands

West Midlands

Eastern

South East

South West

Wales

Rental Trends

Quotas

Scotland

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 Wales

General Overview

This report covers the six-month period between 1 January 2005 and 30 June 2005. Once again the market for farms and agricultural land has been dominated by the continuing implications of the Common Agricultural Policy (CAP) Mid Term Review (MTR) farm subsidy reforms.

The reforms provide for the decoupling of subsidies from production and are intended to allow farmers to focus on producing the quality and type of food the market wants. Subsidies are to be switched to targeted support for environmental and rural development objectives. The new system comprises a single payment that forms a total substitute for the existing livestock, dairy and arable subsidies. First payments under this new Single Payment Scheme (SPS) are due to be made in the period between 1 December 2005 and 30 June 2006.

The devolved administrations in Wales, Scotland and Northern Ireland have decided to allocate entitlement to the new payments on a different, historic, basis to England, which has chosen a progressive transition to an area based model.

An important point in the implementation of the reforms was 16 May 2005, which was the closing date for farmers to submit their applications without penalties for entitlement under the new scheme. The grant of entitlements will all take place in 2005, after 2005 few, if any, new entitlements will ever be created.  Although a National Reserve for hardship cases will be created, the correct completion of the application forms by May 16th was of great importance to potential claimants under the new SPS. Consequently decisions concerning sales or purchases of land have tended to be put on hold. This has resulted in a continuing lack of supply of land and farms on the market prior to the May 16th deadline with low levels of transactions being reported. The market was also relatively inactive during the period of the General Election in May. 

However, purchasers who were seeking property for non-farming reasons were generally unaffected by the need to comply with the details of the SPS rules, and continued to be active in the market. In many areas the slow-down in the general housing market has not been so marked for property in rural locations, and the demand for houses with areas of land from non-farmers continues to be strong.

Farmers by contrast, in addition to dealing with the complications of the SPS rules are also dealing with continuing low levels of product prices, particularly in the arable sector.  Cereal prices at £60-65/ton, milk prices currently being cut by processors and the prospect for sugar beet growers of cuts of over 40% in EU sugar prices all would suggest land prices should be coming under pressure. The  land market though is not solely tied to farming returns, and the tax regime, the unexciting performance of other asset classes and the privacy and amenity benefits of owning property in a rural location are all important influences.  Whilst the individual effect on values of these factors may be limited, their cumulative effect is significant. These factors continue to attract demand from non-farming purchasers and when that demand is met by only a restricted supply, the result has been to keep values high and even edging up in places.  Land that has been put on the market has often sold quickly and to good prices.

Since May 16th the supply position has altered, with noticeably more land and farms coming onto the market. Whilst it is too early to be certain if this represents a single release of pent up demand which will prove short lived, the indications thus far are most of those lots which have sold by auction since May have produced good results.

Although the response of the farmland market to the CAP Mid Term Review will start to become clearer in the months to come, the definitive establishment of entitlements to the new Single Payments is thought to be unlikely before December of this year, and actual payment will not be made until 2006. Therefore the point at which the full effect of the reforms can be judged is still some way off.

A further change to be factored into the rural land market is the new Environmental Stewardship Scheme, applications for the first phase of which had to be received by 1 July 2005. Under the new scheme, which has three levels, Entry Level, Organic and Higher Level Stewardship, farmers must reach a “points target” for carrying out improved environmental management practices. If the requirements of the Entry Level Stewardship (ELS) scheme are met, an annual payment of £30/ha (£12/ac) is made.

The new scheme replaces the former Countryside Stewardship Scheme, which is now closed to new entrants.  Funding for these payments effectively comes from the same source as the Single Payment and while the ELS is reasonably straightforward, it does represent still more change for farmers to adjust to.

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North West

In North Cumbria the market has been difficult to predict, given uncertainties about the Single Farm Payment regime and its application.  It has long been the opinion of local market observers that the agricultural land market in North Cumbria would still be underpinned by the proceeds of Foot and Mouth compensation, but the auction sale on 30 March at Rosehill, Carlisle, exceeded all expectations. The land at Greenholme, fuelled by the bidding of local Irish business man, (eventual buyer of all four lots) was surprising only in so far as the ‘second best bidders ‘ were prepared to push as high as they did.

Of more significance perhaps was the sale of Kirklinton Park Farm, in one Lot (after being offered initially in 4 separate lots) as an agricultural unit, after spirited bidding by several individuals, some from outside the area. Given the recent changes in attitude of planning authorities to residential development of traditional farm steadings, this sale may mark a change back to a more traditional agricultural market, although further time and sales are needed to confirm this.

The market for agricultural land in South Cumbria continues to be strong, notwithstanding the fact that farm incomes and farm rentals remain fairly static. Smaller acreages are still keenly sought after for recreational / equine pursuits ; larger acreages continue to command competitive prices.

In Cheshire the market has been very quiet with few sales of note and little auction activity.  The limited activity is presumably due to uncertainty over the Single Farm Payment.  The majority of sales have been of small blocks of bare land, which continue to fetch very good prices with demand mainly from non-farmers. General lack of evidence makes it difficult to determine overall trends but it is likely that prices will remain firm in the short term.  Normans Hall Farm, Pott Shrigley near Macclesfield a 130 acre pasture farm close to Manchester, was marketed in 11 Lots in the spring, showing how vendors now comprehensively lot farms to target a wide range of prospective purchasers.

Auction Sales include:

North East

Farm prices maintained previous levels with good demand over the period of this report, particularly for the better holdings. Prudent lotting saw a strengthening of prices for smaller blocks of land particularly where there was interest from adjoining owners or equestrian purchasers.

There is some evidence that with higher interest rates non-farming purchasers of smaller recreational holdings are not as active in the market. However, the tax relief available for agricultural holdings are making them increasingly attractive for those with larger sums to invest from the sales of residential property. This more often results in holdings being directly targeted at previously non-farming purchasers leaving farmers unable to compete.

The Hindley Estate, Stocksfield, comprising a grand nine bedroom country house, 178 acre let farm, woodland, and six cottages, is has been marketed with final bids to be submitted by 3 June. Being only 18 miles from Newcastle upon Tyne there is expected to be considerable interest.

Auction sales held include:

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Yorkshire and Humberside

The sale of complete farms is still not the order of the day and the sales that have taken place have followed the usual trend of lotting to optimise returns.

Although there appears to be an increase of land on the market, actual sales evidence is sparse and points to very little change, if any, in values since the last report. Uncertainty of the ultimate outcome of the Single Farm Payment scheme is still influencing decision making and there is, to date, no discernable trend in value between transfers including the historical element of support and those where it has been retained by the vendor.

The 10 month farming period required by the regulations may be a crucial factor in the equation and more land may come onto the market once claimants have qualified. The consequences of this will ultimately have an effect on value.

At the present time, however, non- agricultural money and the lack of an adequate supply of land on the market are helping to sustain values. Only time will tell what effect the current EU changes will have on the agricultural land market, but the picture should be much clearer in 12 months time.

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East Midlands

The first half of the year has been characterised by a lack of supply of land and farms on the market, as landowners and their agents focussed on getting their applications for the new SPS as accurate as possible. The importance of getting the application right in 2005, because this is effectively the only time entitlements under the new scheme will be allocated, meant that most farmers put any decisions concerning land transactions on hold. Prior to May 16th the market has continued to be quiet, with few sales of note.  Little land was being offered for sale, and most sales are of small acreages with prices for smaller blocks exceeding expectations as non-farming money continues to come into the market.

Post May 16th 2005, the last date for farmers to submit their MTR SPS application without attracting penalties, there has been a noticeable rise in supply of land on the market, including quite a few larger commercial lots. These include a number of fully equipped farms selling mostly in lots, but a few are being offered as single units. Although it is too early to comment on the effect on the land market of the new SPS, it will be interesting to contrast subsequent sales of land and farms within reach of the urban areas of the region against locations in the more isolated parts of the East Midlands where the bid of the non-farmer and commuter will be weaker. If the trend already seen with farm business tenancy rents on purely commercial arable land is followed, this latter class of land should show some of the first signs of pressure on values. It will be the matching of this increased supply against the pent up demand from the MTR period that will hold the key to how prices actually move.

Auctions include:

West Midlands

The overall effect of the CAP MTR with its deadline for applications on 16 May 2005 has continued to hold down the supply of land and farms on the rural market. However, within the report period there was a noticeable short term increase in properties marketed up to the end of March 2005, as agents sought to complete sales in time for the purchasers to make their own applications for entitlement to the new Single Payment Scheme. Since the closing date for SPS applications passed on 16 May there has been a marked increase in the supply of land and farms coming onto the market, showing that there is an appreciable amount of pent up supply.

In Shropshire thus far values for bare arable land have fallen slightly, with fully equipped farms either remaining the same or edging slightly upwards. Overall the picture in the region is of static values due mainly to the lack in sales caused by the effect on the market of the CAP MTR deadline.

Whilst the general residential market has slowed down, there is still strong demand for houses in rural locations especially with land. This in turn results in keen competition from non-farmers for any land on the market suitable for addition to residential properties. This effect remains strong across the region. Surveyors acting for vendors continue to take every opportunity to comprehensively lot farms to maximise returns to their clients, and are actively targeting non-farming purchasers when marketing lots that previously would have been aimed mainly at commercial farmers.

Eastern

Across the region a low level of supply of land and farms is reported on the market for the first six months of 2005. The explanation for this is no doubt because of the uncertainties over the Single Farm Payment and transfer of entitlement. This lack of supply has again helped to maintain values as buyers competed for the small amount of land available.

In Cambridgeshire whilst there is very little land being publicly marketed, there is evidence in the Fens of significant numbers of private sales taking place, often prompted by outgoing tenants retaining the historic element of the subsidy. The sales have been rushed through to enable the new owners to apply for entitlement allocation prior to the 16th May 2005 deadline for SPS applications, albeit only for the flat rate element. Such sales, where they are in the purely commercial farming areas of the Fens, are showing significantly reduced prices - £1600 to £1700 per acre prices are being seen for good Grade 2 beet and combinable cropping land. If any increase in publicly marketed land is to be seen, it may not materialise until at least Autumn 2005, when farmers should receive details of their entitlement allocations and payment rates.

In Mid Essex the sale of the Essex Farms Estate has now completed . It was sold as a whole for just in excess of the guide price of £15.7 million. The estate totals 4,624 acres and comprises 3 farms in Ongar, High Ongar and Great Dunmow, including farmhouses cottages and farmbuildings. Apart from this the level of supply in Essex has remained low and the increased land prices from 2004 have been maintained.

In Suffolk there has been a dearth of sales because of the uncertainties over the Single Farm Payment. Recently a number of modest sized holdings have appeared on Agents web sites where the main interest is the house. One notable holding currently on the market is Brook Hall Farm Sudbury, 1446 acres grade 2/3, 6 bed farmhouse, 2 detached dwellings, terrace of 4 let cottages and range of modern & traditional buildings. The whole is for sale through the purchase of the farming company to include machinery and the on-going business, at an asking price of £6,600,000 (£4,564/acre). Break-up is an option. There is no evidence to indicate any significant movement in values over the six month period, although now that the deadline for the Single Farm Payment has passed more land should be released on to the market.

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South East

Similar conditions have been reported from the counties in the region in that little significant volume of land was put to the market during the first half of the year. The uncertainties of the CAP Mid Term Review and the Single Farm Payment have resulted in land not being offered for sale, unless it is unavoidable. The general picture is of values being maintained or increased by this lack of supply. In Surrey the lack of land on the market has caused prices to rise, by up to 10% in some instances.

In Kent it has been a period of few public offerings although Plurenden Farm near Ashford, offered last autumn was sold to a new farm entrant as a whole at a price very close to the £3.5m guide (£8,235/acre) for this 300 cow dairy and arable unit with period house, 6 cottages extensive farmbuildings and 425 acres. The same vendor has also sold a block of 89.32 acres of Grade 3 arable land for a price in excess of the £3,000/acre guide. In West Kent at Cobham near the A2 the market was stimulated by the private tender offer of 362.63 acres of Grade 1 and 2 land with useful modern buildings. There is understood to have been keen interest from existing farmers at over £4,000/acre but the property was eventually bought by the Forestry Commission for the establishment of new commemorative woodland to mark the Nelson/Trafalgar bicentenary.

In the Oxfordshire/Berkshire/Buckinghamshire area one noticeable trend is the sale of farmland for gardens at prices reflecting the booming residential market.

In Hampshire and the Isle of Wight although there have been few commercial farming transactions, where land is offered in small parcels or larger areas are subdivided, there is still a strong market, based on the perceived investment value and the lack of returns in the other sectors of the investment market. Few small farms / smallholdings are being offered for sale, because the costs of finding alternative residential dwellings make the move unattractive. Those that are being offered are finding non-farming buyers seeking a base in the countryside. The increased interest in land being used for environmental objectives is supported by Conservation Charities, and residential purchasers who support these objectives.

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South West

Overall a buoyant market is reported in the South West and demand in Cornwall is outstripping supply. There is a shortage of good farms over 200 acres with about 50% of buyers being local landowners. Bare land values are on the increase.

In Somerset the land that is appearing on market is well sought after and good prices are being realised in excess of expectations. Demand remains strong across the board for all types of land from all types of buyers. Whilst SFP and future income levels may deter the farmers from entering the market, they still have to compete with non farming buyers still finding agricultural land attractive as an investment.

In Devon, as in Somerset and Cornwall, the market for land has been strong in the last six months with prices well above expectations being achieved. This demand would seem to be coming mainly from non farming purchasers, particularly where farms with good houses or houses that are in good locations and require some work are being offered for sale. Prices for bare land are also increasing with strong demand particularly for smaller blocks of land.

In Dorset demand is outstripping supply in most areas, which is keeping prices high and increasing. Agents are reporting that there is caution in other investment sectors such as pensions, equities et and land is seen as a safe alternative home for your money. There is a lot of money in the ‘amenity market’ ie. £10,000/acre plus is not unusual for small paddocks. Not many fully equipped farms are selling (splitting them up is more common), but the few that are selling do sell well. Traditional farmers are still in the market, but increasingly there are more non-farming people in the market for Dorset land.

In Gloucestershire and Wiltshire the market in the more favoured residential areas is pushed up by non-farming buyers. The advantages of land ownership to this sector is enhanced by the phasing in from May of grants/ subsidies that will help fund environmental features.

Auction results include:-

Wales

Since January 2005 only limited sales of agricultural land have taken place either by auction or private treaty. The most numerous class of sales there have been was for small/medium blocks of accommodation land, with particular interest being shown for small parcels closer to urban settlements suitable as pony paddocks/amenity land. In the period before May 16th, in view of the uncertainties surrounding the Single Farm Payment, vendors have been cautious in placing land or whole farms on the open market.

A 1095 acre hill farm on the slopes of Snowdon, Clogwyn y Gwin, Rhyd Ddu, went on the market in May for £750,000, and was reported to be attracting strong interest from prospective purchasers.

That land which has sold has met good prices as shown by the following auction sales.

Sales of tenanted farms 2005

Interest remains strong for properties let on full 1986 Agricultural Holdings Act tenancies.

A 65.67 acre block of let land near Kettering, Northants, was sold by auction on 2nd June 2005 for £122,000. The price per acre devalues to £1,858 and the yield is 2.66%. The land was arable Grade 3 ground.

The asking price for 198 acres of grassland near Camborne, Cornwall, currently for sale subject to tenancy, shows a similar yield of 2.91%.

A higher yield was shown by the confirmation of a summer 2004 sale of a 1045 acre arable unit near Gainsborough in Lincolnshire. The property was sold to the sitting tenant, a farming company, for a price representing a 5.23% yield. The fact company tenancies often offer little prospect of obtaining vacant possession probably accounts for the higher yield.

Lower yields continue to be shown for those properties with any prospects for obtaining vacant possession, development potential, or locations near major urban areas. A 120 acre let farm near Guildford, Surrey, is for sale at an asking price showing a 1.15% yield. The property includes two 3 bedroom cottages, modern and traditional stock buildings and arable land.

Little John’s Farm, Reading, a highly diversified livestock and equestrian unit and site of the Reading Festival is for sale subject to a 1986 Act tenancy. The guide price of £1.5M shows a yield of 5.4% on a total income for 2004 of £81,083.

RENTAL TRENDS

Agricultural Holdings Act 1986 Tenancies

Again little change in 1986 Act rents has been reported. Rents appear static with few notices served but it is anticipated that tenants may consider serving notices this autumn to trigger a review with effect from autumn 2006. However with payment of the new SPS not expected until into 2006 the effect of the MTR will still take some time to work through the system. Landlords and tenants currently appear unsure as to whether to trigger rent reviews under existing tenancies because of concerns over negative SPS consequences. However, with 1986 Act tenancies, many will have tenants who farmed the same land in the reference period and the tenants should therefore have average levels of history, so perhaps any short term effect of SFP will be less marked, than is the case with land let on FBTs (see below).

As in recent years, the rental value of the farmhouse will often tend to offset in part any reduction in earnings, caused by the subsidy reforms.

Agricultural Tenancies Act 1995, Farm Business Tenancies (FBTs)

Falling FBT rents continue to be reported, due to the effect of the CAP Mid Term Review. In East Anglia for example tenants on short term arable FBTs are understood to have threatened not to apply for entitlements on such land and to stack their history from that land onto other land under their control. Rents as low as £30/ac on arable land in Lincolnshire have been reported, for a 3 year term which was making £80/ac just a few years ago. The control of the historical element of the new subsidy by longer term tenants gives them an initial bargaining counter in negotiation, although this will not last in England under the transitional based SPS system. There have been reports of rents below £20/ac for bare arable land that has no SPS entitlement available.

However, until entitlement to and levels of the new payment are confirmed, the resulting effect of the reform on the rental market will remain patchy. Any prospective new tenants considering bidding for a farm do not yet know what the SPS payment rates will be, and Sugar reform proposals in the last few weeks have added to the uncertainty.

There is anecdotal evidence that in Eastern England several farmers who are leaving the industry this year or next and intend to retain the entitlement income, will let bare land rent free on condition that the tenant takes responsibility for the SPS cross compliance requirements (maintaining the land in good agricultural and environmental condition).

Current levels offered on FBT rents are giving rise to new ways of looking at these tenancies. The Royal Sandringham Estate in Norfolk is one example, where a 10 year FBT for an organic 165 ac grass unit is on offer. The residential element is being let on an assured shorthold tenancy at a rent close to residential market levels. The tenant will also lease the SPS entitlement for the land at its face value, leaving only a nominal rental sum for the land and buildings.

QUOTAS

Milk Quota Sales and Leasing (2004-2005 Season)

The end of the 2004-2005 season was dominated in England by sales of quota to Welsh, Northern Irish and Scottish producers who are able to utilise the quota in their historical based MTR claims. Up to 12p per litre may be payable in the new dairy premium payments in these countries. Prices for quota sale rose from under 12p per litre around Christmas to up to 14p per litre at the end of March. However the prospect that UK milk production would finish the 2004-2005 quota year under the national quota thus avoiding any super-levy penalty acted to limit these price rises. Leasing was in the region of 4-6p per litre at the end of the quota year. The new dairy premium payments are subject to the principle of artificiality and attempts to stockpile artificially high quota holdings solely to claim the premium could attract penalties.

Milk Quota Sales and Leasing (2005-2006 Season)

A slow start to the new season has been reported with much reduced prices for leasing and permanent transfer. Prices for sale in June are under 6p per litre, and for lease under 1p per litre. Recent price cuts applied by processors are further squeezing dairy farmer’s margins.

Sheep & Suckler Cow Quota

Trading in 2004 was the last year of these schemes, as following the CAP Mid Term Review reforms these quotas have ceased to exist.

Scotland

The general theme of all reports is that the market is limited because of the uncertainty of the effects of the Single Farm Payment on values but farms and land that do come to the market sell well indicating a good demand in spite of the current changes. The residential element in any farm sale is remains an important element of the final price achieved and values over the period have shown modest increases.

North East (Tayside)

The market for all grades of agricultural land is quiet as farmers absorb the implications of the Single Farm Payment. Unless forced to sell they seem content to sit tight and deal with the consequences of low commodity prices and concerns of ichanging interest rates.
From the farms that have sold it is apparent that the residential element continues to play a significant part and with demand outstripping supply, values of the better quality of land continues to rise.

Scotland North East (Grampian)

The market continues to be limited because of uncertainty over the effects of the new Single Farm Payment system and general commodity prices. Competition for the limited amount of land available is maintaining price levels. Advertisements emphasise residential quality, development potential and sale in lots.

Scotland South West (Dumfries)

The market is very quiet in Dumfries & Galloway probably due to the introduction of the Single Farm Payment. However, the few farms that are being advertised are selling for in excess of the asking price. Those properties with a good residential element continue to be in great demand.

Value of equipped land with vacant possession as at 1 July 2005

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 July 2005

Value of unequipped land with vacant possession as at 1 July 2005

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 July 2005 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

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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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