Farmland prices remain relatively steady compared to a year earlier according to the RICS/RAU UK Rural Land Market Survey, H2 2017.
The transaction based measure of prices (including a residential component*) rose fractionally in H2 2017. However at £10,260 per acre, prices are slightly down (2%) on a year ago. Meanwhile, bareland prices fell in H2 with the opinion based measure slipping a further 1.4% leaving it down 8% year on year. Moving forward, price expectations are slightly downbeat with 13% more respondents expecting to see land prices fall (rather than rise) in the twelve months ahead. Again, sites including a residential element continue to fare better than commercial only.
The availability of farmland for sale continued to decline over the second half of last year with respondents returning the most negative reading (in net balance terms) since 2004. Both residential and commercial units saw supply decline in the latter part of 2017 with contributors citing Brexit as having an impact. The issue of Brexit and its effect on the rural land market has been highlighted by respondents in every survey since the referendum. Looking ahead over 2018, 32% of respondents felt the ongoing Brexit process would result in less land being made available for purchase.
Where are people buying?
At the headline level, and following a two year period in which demand has deteriorated, the H2 results show a stabilisation in new buyer interest. Individual farmers continue to drive interest in rural land (60% of purchases) while lifestyle buyers continue to make up just over a fifth of all transactions.
According to the H2 results, plots with a residential element are more highly desired by would-be buyers than commercial only units. This trend is long established and has been seen for the last six successive reports. Anecdotal evidence suggests that buyers focus on high quality land in a good location resulting in the challenge to sell lower grade farmland persisting.
The latest results show average arable land rents dipped in H2, but were still up by 4% on an annual basis. Compared to the 2014 peak however, arable rents remain down by more than 10%. Average pasture land rents also slipped during the second half of 2017, albeit only marginally, equating to a 1% annual decline.
Alex Lawson, Director of National Farms and Estates at Savills said "While some farmland values continue to be affected by short-term uncertainty we believe the downturn in values initially triggered by weakness in commodity prices during 2014 is slowing. Currently, there is a huge range in values across all land types and geographies with some commercial areas and lesser-quality properties seeing greater falls than others. In certain circumstances excellent sale results are, and will continue to be achieved which is particularly the case for farms and estates with significant amenity appeal which are proving to be increasingly popular."