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2023 saw a continuation of strong competition for blocks of good farmland and, in particular, for larger complete farms. Unless there is a significant increase in supply of farms to the market, I do not expect this pattern to change in 2024.
The quantity of available farmland rose slightly in 2023 but still remains below historical level. With little pressure from the banks, it remains the instinct of many farmers and of their families to retain land if possible, even if responsibility for the day-to-day farming is given over to a contractor. The family can remain in the farmhouse and can enjoy the amenity of the farm. Diversification projects can be pursued. The taxation advantages of holding farmland have not been eroded. The status quo is appealing to many.
In the meantime, there is a continuous demand for farmland and for farms, both from those within the industry and from without. Landowners who have received a welcome windfall from development sales can quickly find themselves at the end of their 3-year rollover period, at which time sensitivity to the purchase price is dulled. Funds from outside agriculture, particularly for residential properties, is almost limitless.
Accordingly, we have seen that virtually all decent farmland achieved a minimum of around £10,000 per acre last year, but with local competition this price could be pushed to £12,000 per acre, £14,000 per acre or even higher on occasion.
For purchasers with many tens of millions of pounds to spend, of which there is no shortage, a residential farm of 1,000 acres or more is often the target. However, with only a couple of dozen such farms available every year, competition can be fierce.
As I write, the 2024 selling season is just beginning to get underway and we are beginning to see a few farms coming forward. At present, I see no sign that the supply will be much different to last year, and accordingly I would expect to see similar results. Smaller blocks of land will be subject to local competition, which can show a significant variation in prices dependent upon the appetite of the immediate neighbours. Larger blocks will attract interest from across the country, and the expectation is that prices will be in line with the prices which we have seen for the past few years.
At Robinson & Hall, we monitor all farmland sales across the region and larger sales further afield. We are happy to advise on all sales and purchases. Please contact David to discuss further.
Globally and nationally, we are in testing times. Interest rates, inflation and energy prices remain stubbornly high and certainly at levels which have not been seen for several decades. Labour costs also remain high, with shortages in most sectors. International tensions in Ukraine and now in Israel/Palestine provide further threats to our domestic security.
As a result, many sectors are struggling, including manufacturing, transport and leisure. House prices are falling, the value of investment properties is falling and the international property markets in many parts of the globe are suffering quite badly.
In domestic agriculture, we still have relatively high fuel and fertiliser prices together with a shortage of experienced farm labour and an extreme shortage of seasonal labour. Commodity prices generally are lower than a year ago and profits are feeling the pinch.
Nevertheless, despite all this gloom, farmland values continue to go from strength to strength. There is virtually no decent arable land selling for less than £10,000 per acre, and to see prices rise to £12,000, £14,000 and even £16,000 per acre where there is local demand is far from uncommon.
Significant blocks of grassland in the central and eastern counties might not be so keenly pursued, but complete farms of 500 acres or more have been in short supply. There remains considerable cash within the farming community from rollover funds, with farmers looking to relocate to their dream holding. Regrettably, the choice of such holdings has been limited and selling agents have had little difficulty in securing sales.
There continues to be significant funds available from outside the farming community as well. In difficult times, land is seen as a safe bet. With stock markets difficult to predict and with other property investments in decline, considerable money has been coming into the farmland market.
The number of unsatisfied buyers from the 2023 season is substantial and this can only mean increased demand in 2024. Without a significant increase in supply, which seems unlikely, I would predict that prices will either maintain their current levels or increase yet again in 2024. Generally speaking, farmers are not under pressure from their banks and I see no reason why there should be significantly more farms on the market next year.
Finally, I would highlight a phenomenon at the lower end of the market. Paddocks, small pieces of woodland, off-lying rundown buildings, old railway embankments and the like may hold no real value to a farmer. However, on the open market, these seemingly useless items can secure extraordinary prices if marketed correctly. We tend to put these properties through our regular property auction. The competitive environment of the sale room brings the best out in bidders, and the results can be extraordinary. Farming clients have been able to sell an asset which has no value to them but which enables them to pay off the overdraft, pay the school fees, erect a new grain store or upgrade the combine.
To conclude, agricultural land is often compared to gold. It provides a safe investment in difficult times. Where the demand is rising and the supply remains static, we can only see a strong market through 2024.
For more information or to discuss the opportunities available to you, please contact David.
