Covid-19 impacted the farmland market in both 2020 and 2021, affecting property marketing plans. In 2022, whilst supply did increase, it remained constrained as landowners took stock of the new post-pandemic landscape. 2023 initially appears to be a return to normality, with the benefit of more certainty in the future agricultural support plans across England, Wales and Scotland. 

SUPPLY 

We have forecasted an increase in farmland supply over the next few years, albeit not to its pre-Covid levels, with an anticipation it will reach 150,000 acres by 2024. In total 16,700 acres have been launched across Great Britain in Q1 2023, the most we have seen since 2016, and 30 per cent more than the same period during 2022. 

In England, with the exception of the East Midlands, all the regions have advertised more acres than their ten year averages, however the same cannot be said for the other home nations. Scotland experienced a quiet first quarter, with just 1,600 acres marketed compared to the 10 year average of 2,600, whilst in Wales 21 per cent fewer acres have been marketed than in Q1 2022. 

The use of 10 year averages can skew the picture slightly given the constrained supply since 2017, therefore the last period of relatively normal market conditions and activity, from 2011-2015 (prior to the Brexit referendum), provides a useful benchmark against which to assess current levels of farmland supply.

Against this, supply across Great Britain is down 5 per cent, England is up 3 per cent, Scotland is down 89 per cent and Wales is up 17 per cent. 

Whilst supply seems to be improving, it is still too early to confirm this trend. This being said, Savills agents have confidence that there are a good number of commercial units coming to the market in the next two quarters. As is often the case, some sellers need the reassurance from the visibility of other sales or market activity before pressing ahead with their own sale, and late March in particular has seen a flurry of activity. In January and February, agents reported a lot of properties were offered privately with vendors choosing to test the market rather than embarking upon an open market launch.

VALUES AND DEMAND 

Whilst supply is likely to increase across the next quarter, there remains pent-up demand in the market driven by a wide range of motivations associated with land investment. In Q1 we have seen increases in value for both grade three pasture land and poorer quality pasture land, indicative that nature-based solutions on these land types are still driving values. When comparing March 2022 to March 2023 across Great Britain, a similar story emerges with the highest increase in land value coming from poorer quality pasture land at 12.9 per cent, the only land type to outperform the highest levels of inflation seen during this period. 

A backlog of capital gains tax rollover relief-motivated buyers remains a force in the market. These buyers are required to reinvest within three years of selling or disposing of an asset, and given supply has been constrained for the last three years, the clock is ticking for many of these investors. 

Values in the mainstream housing market have fallen and this is having a knock-on effect for farms with significant residential value, or excess residential properties, which both appear to be lower in demand. By comparison bare land properties are experiencing stronger competition, especially from established farmers. 

Prime arable land across the North and East of England remains the most valuable in the country at £10,800 and £10,500 per acre respectively. Overall, average land values in Great Britain increased 1.6 per cent during the first quarter of the year. 

To what extent the increases in supply will meet demand in 2023, is yet to be seen. Quarter two will undoubtedly paint a clearer picture, with close to 50 per cent of the acreage marketed each year usually launched during this period. Many prospective buyers will hope this trend continues.

Further information

Contact George Marffy or Alex Lawson