Supply down

Our research shows that supply of farmland to the market in the first quarter of 2017 is down 42% compared to Q1 2016, and 38% compared to the long-term average from 2001 (see below). In total, across Great Britain just over 11,000 acres were publicly marketed in the first three months of 2017.

In England, specifically, supply decreased by 26% in the first quarter, while in Scotland market activity was just half what it was in Q1 2016, with around 2,500 acres of farmland publicly marketed in the national farming press. In Wales, the situation was even more significant: just 100 acres were publicly marketed compared to over 2,200 in the same period last year. The farmland market is generally weak in the first three months of the year, and we have to be careful with percentage swings on low overall numbers. However, anecdotal evidence suggests that while so much political uncertainty remains, this pattern will likely continue at least into the second quarter of 2017.

History repeating itself

Currently, there is a considerable amount of political uncertainty surrounding the Brexit negotiations and the triggering of Article 50, with perhaps even a second Referendum on Scottish Independence on the horizon. We know from past experience that such uncertainty has an impact on the amount of farmland coming onto the market – for example, during each Common Agricultural Policy (CAP) reform negotiation, the volume of land marketed usually reduces, recovering once the position becomes clear. Furthermore, the weak pound is possibly providing some respite on farm debt by increasing the value of subsidies and wheat prices, which may be holding off potential debt-related sales. Diminishing supply may help sustain land values, while uncertainty combined with good local advice, often provides opportunities for both buyers and sellers. In addition, land values are still supported by long-term low supply, competing land uses and a variety of ownership motives. However, we expect the demand profile of buyers to remain diverse and, for investors, lower capital values will be partly offset by improved income yields.

Market commentary

England, Alex Lawson

As we enter the traditionally active spring marketing period, the supply of high-quality farms and estates publicly available remains scarce. Inevitably, the current political uncertainty is deterring some vendors from going ahead with a sale; however, there are committed buyers who are looking for the best properties in good locations if they are correctly priced. It will be fascinating to see how 2017 continues to evolve, but, as we know from previous property cycles,uncertainty for some often means opportunity for others 

Scotland, Charles Dudgeon  

Negotiations around Brexit and a potential second Referendum on Scottish Independence will inevitably create some uncertainty over the next few years and may lead to a prolonged shortage of supply, which will continue to support land values. However, we expect value for money to be a more significant driver: the price differential is encouraging farmers from England to expand their farming enterprises northof the border and this is likely to continue. The quest for scale is a predominant driving force, with progressive farmers focused on expansion. 

Wales, Daniel Rees

The first quarter has been busy in Wales, with the sale of two of the largest dairy farms to come to the market for many years – just under 1,300 acres in total. Activity within the farms and farmland market has been slow, but it’s still very early in our season. We have already visited a number of farms that will potentially come to the market this year and there have been encouraging viewing numbers on existing farms for sale. Buyers include existing farmers looking to expand or relocate,investors and ‘lifestyle change’ buyers from both the UK and overseas.

Farmland Value Survey

So far in 2017 there is very little transactional evidence. Our research indicates that there continues to be some pressure on values across all farm types, although less so on grassland than arable land. The market continues to record a wide range of actual prices achieved, with the end result depending largely on local and especially neighbouring demand.Buyers are generally selective about what they want and the distance they are willing to travel. The graph (left) illustrates the wide range of average values as recorded by our Farmland Value Survey. However, average values, as noted above, only tell part of the story and there are some sales that are completing well above these values. Conversely, the same is true at the lower-value end of the market, where local demand is, at best, weak.

^{Source: Savills Research}