Agricultural Market Commentary
The Farmland Market
The past year has witnessed another strong performance in the market for farmland in the East Midlands.
Our view being an overall rise in excess of 5% year on year; with the strongest demand being once again for commercial arable farms, although grassland sales have more than kept pace during a buoyant year. This routinely has seen guide prices exceeded, sometimes by as much as 25%.
As in previous years, the supply of farms and farmland for sale has remained at a historically low level, according to statistics prepared by the Royal Agricultural University/Royal Institution of Chartered Surveyors (RAU/RICS). This shortage undoubtedly has played a part in the increase in the average level of price per acre which is now approaching £10,000 per acre. The investment market for land, although far more restricted than for vacant farmland, has also been surprisingly buoyant given static rents where, in 2014/15 King West have been active on behalf of purchasing clients. The firm were also active in the acquisition and sale of vacant land including the publicised of 170 arable acres on behalf of Trustee clients during early 2014, and sale by auction of a 75 acre grassland farm with farmhouse during the middle part of the year at approximately £9,500 per acre.
Recent RAU/RICS statistics for transactions in the East Midlands no longer show purchaser types, but our experience is that individual farmers still lead the way, with private and trustee investors featuring prominently in the buyers market.
Some commentators are suggesting that poor commodity prices over the past year, despite good crop establishment continuous, even on heavier soils, and continued Common Agricultural Policy funding with introduction of the new Basic Payment Scheme, will shortly start to show through into a less buoyant market.
Until now, we are yet to see evidence of this, perhaps to the fundamental strength in the sector, the intrinsic durability of the investment and capital taxation benefits. These, coupled with stable long-term ownership remain powerful factors in generating demand.
Our view being an overall rise in excess of 5% year on year; with the strongest demand being for commercial arable farms.