Average farmland prices have held steady in the second quarter of 2019, at just under £7,000 per acre, some 5% lower than five years ago but still 50% higher than in 2009, the latest index shows.
Uncertainty among both vendors and potential purchasers has created a bit of a pressure cooker situation where only those strongly motivated to buy or sell are active,’ according to the Knight Frank farmland index.
With the deadline for reaching a deal now extended to October the report says it seems unlikely that there will be any meaningful movement in prices for the rest of the year.
By mid-May the amount of land advertised for sale publicly was well down on 2018 and there are not many signs of this trend being reversed, although activity has picked up slightly.
Longer term, some commentators are arguing that Brexit will lead to an inevitable sharp decline in the average value of farmland. ‘I’m not so sure that this should be taken as a given, regardless of whether we are in the European Union or not, there are still plenty of reasons to own farmland and there are other arguably more pressing challenges facing farming,’ said Clive Hopkins, head of farms and estates at Knight Frank.
‘What I do believe is that the market will become even more variable than it already is. For example, as area-based support payments are gradually scaled back, soil quality and productivity will become much more important to commercial farming buyers,’ he explained.
‘But that’s not to say only the best agricultural land will be in demand. As support shifts towards the delivery of environmental benefits, more marginal farms may well be able to create new income streams,’ he added.
In the meantime, the report points out that cereal prices are holding up and those high quality farms that do come to the market will sell well. ‘But until politicians in Westminster and Brussels get their acts together we can only wait impatiently for some kind of normality to resume,’ Hopkins concluded.
During 2018 there was a saw a slight increase in the number of farms for sale in Scotland. Demand was strongest for prime arable units and for stock and hill farms with tree-planting potential.
The report says that buyers for farms in Scotland are coming from throughout the UK and abroad. Scottish farmland is still deemed good value compared with the south, with purchasers moving north to acquire larger farming units. The firm expects to see less land on the open market this year, but plenty available privately.
In Wales predictions for 2019 remain mixed. Larger stock farms of 300 acres or more will be relatively rare this year, but prices are holding up well for hill farms, with larger units averaging £6,000 per acre depending on the quality of the house and buildings.
Smaller farms of up to 100 acres will be more plentiful with demand possibly outstripping supply from those interested in lifestyle changes, not to mention living in beautiful countryside. The residential element and location will largely drive these values, with a smallholding near Monmouth of some 30 acres making close to £900,000 recently.
