Farm land values in England and Wales fell in 2016, caused by concerns about how Brexit will affect the rural sector, but could stabilise this year, according to new research.
Overall values fell by 2.6% in the final quarter of 2016 and were down 9% year on year, the biggest annual decline since 1999, the data from the Knight Frank farm land index shows.
The average price of land is now just under £7,500 per acre but the figures also show that over five years prices are up by 23%, over 10 years up by 127% and over 50 years up by 4,501%.
According to Andrew Shirley, head of rural research at Knight Frank, the decline in values in 2016 needs to be viewed in the context of the immense change that is set to sweep across the UK’s farming industry as the UK leaves the European Union.
‘Given that the decision to leave the EU will have the biggest impact on agriculture of any event since Britain joined the European Economic Community in 1973, the market remains remarkably robust,’ he said.
‘Sustained low interest rates, historically low levels of land for sale, a bounce in the value of commodity prices and a growing number of farmers with rollover funds from land sold for developments like the high speed rail route HS2 are all helping to sustain farmland values,’ he pointed out.
‘And, crucially, despite the uncertainty it brings, many farmers see leaving the EU as an opportunity rather than a threat. However, the combined influence of all these factors varies hugely across the country,’ he explained.
‘Much has been made in recent years of a developing two tier market for farmland, but we are now in a more complex multi-speed environment where the outcome of almost every sale is hard to predict. Potential buyers are certainly more cautious in the absence of other bidders, but strong prices are still being achieved where there is competition from other interested parties,’ he added.
Looking forward, Knight Frank predicts that land values are likely to remain steady over the next 12 months as the imbalance between supply and demand continues while Sterling’s ongoing weakness will continue to buoy commodity prices and boost remaining EU subsidy payments.
Shirley also pointed out that the Government’s recent announcement that it wants to build one million new homes by 2020 may also provide localised support over the next few years but the big test of the market will come when the UK actually leaves the EU and any transitional period for agricultural support comes to an end.
