Non-farming buyers set the pace in farmland market

— English Estates & Farmland Market Review, Winter 2018/2019 by Strutt & Parker

The farmland market has proved more resilient than many might have predicted considering the Brexit-related uncertainties and practical challenges posed by the weather over the past 18 months. Despite an increase in the supply of farmland in the market, average prices have remained stable.

The average price for arable and pasture land rose by 2% in 2018.

Of course the big question on everyone’s lips is what happens now?

The Agriculture Bill, published in September, confirmed the government’s intention to phase out support payments over a seven-year period and much has been made of the negative impact this could have on land prices. This is set against continuing uncertainty, over our leaving of the European Union.

However, farm profitability is only one of a number of factors that determine farmland prices, not least because farmers are not the only people who buy land.

Over the past two years non-farmers have played an increasing role in the market. Land in the right location remains in considerable demand for capital investment for many non-farming reasons, including development potential, privacy, tax reasons, or amenity.

For many of these investors, generating profits from farming is not their primary focus. Whilst this non-farmer demand continues, the percentage of land bought by existing farmers has decreased, which is in part because of the uncertainty around future farming incomes and therefore lack of confidence to borrow to fund purchases.

The differing demand from these different buyer types has created the wide range of values which are now being achieved. In times of uncertainty investors tend to be attracted to tangible assets as they see them as a safe haven for their capital. Looking forward, we may continue to see a widening of values achieved with farmers more reluctant to enter the market.

In the immediate future we also anticipate values will be supported by a lack of supply.

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