British agricultural land values set to rise 5.5% over next five years
The value of farm land in Britain has increased by 149% in the last decade and growth of 5.5% is forecast for the next five years.
Overall the land market in the countryside is looking at sustained steady growth in the long term, according to the agricultural land market survey from property firm Savills.
For the first time the firm’s research team has put a value on all of the nation’s farmland and woodland, putting it at £185.7 billion for 39.8 million acres of land.
Barring any major economic or fiscal changes, the firm does not anticipate significant price rises or falls in the short to medium term and are forecasting overall average growth of 5.5% for the next five years followed by sustained, steady growth in the longer term.
‘Over the past few years we have seen a widening in the range of values achieved, which we expect to continue as buyers choose to invest in the best land available,’ said Alex Lawson Savills director of farms and estates.
The report reveals that the proportion of farmers selling last year was lower than in 2015 and contributing factors included the recent softening in average farmland values, uncertainty surrounding Brexit and the short term prospect of an increase in subsidy as a result of the weak pound. Also there was an increased use of borrowings to fund purchases, 30% of buyers compared with 23% in 2015.
It explains that while the weak pound, which has reduced on paper the average value of farmland by £1,000 for the overseas investor has not yet led to purchases in the numbers seen before the global financial crisis of 20%, enquiry levels have increased for good quality commercial arable land and more complex blocks of land with long term strategic potential.
In the short term, the downside of Brexit on farmland values is likely to be muted.
‘The weak pound creates a favourable buying environment for buyers from overseas as mentioned above and this along with the potential reduced supply driven by uncertainty, will help support farmland values,’ said Ian Bailey of Savills rural research.
In addition, he expects increasing amounts of rollover cash and general economic improvement in the medium term to support demand and therefore prices.
However, he added that in the event of a significant reduction in farm subsidies in 2020 and therefore average incomes, the negative effect is likely to be greater on rents than farmland values.