In the last 5 years, agricultural land values have more than doubled to an average of £10,000 per acre. A limited supply and continued demand have driven prices higher, in some cases to over £12,000 per acre. Woolley & Wallis have been involved in sales in the last year alone where land has been purchased for more than this. Farmland continues to outperform against other investments such as gold and the stock exchange.
Buyers can come from a variety of sources:
Farmers: These buyers already have the skills, knowledge and desire to purchase more land. Many farms in Britain are family owned and expansion can be a method of bringing family members into the business and to maintain a viable enterprise. Farmers are often “asset rich and cash poor” but have the property base to offer as security for borrowing, in some cases, sizeable amounts of capital. Additional areas of land allows fixed costs to be spread and ensuring that in today’s tough market large machinery is worked to maximum efficiency
Lifestyle: purchasers often have good business skills and aptitude. The desire is not primarily for agricultural use but to acquire a residence in the countryside where land is regarded as more important as a buffer and protection and are keen to have control on the land which surrounds them. The economic return, whilst important, is often of secondary importance. To ensure that their farm is kept working, either the land is rented out to a local farmer or a share farming / contract farming arrangements.
Tax: There are significant opportunities to save tax through owning land. We have seen funds switched into agricultural property as the land can generate a secure return on capital invested. Investors prefer to acquire arable land as the onward management is often easier and involves lower charges than on a more complex livestock arrangement. Whilst the rules are complex, the chance to pass the value of the land down the generations and avoid paying Inheritance Tax can prove highly attractive.
Charites: This sector has been active in purchasing agricultural property. For the right piece of land, whether top quality arable land or permanent pasture. Examples of purchases include forestry, wetland, lakes and disused canals. The whole buying/selling process can take a little longer but vendors can be surprisingly sympathetic in wishing to safeguard the future of their land in charitable hands.
The demand for agricultural land continues to be strong and the range of buyers continues to be diverse and cash rich. The amount of land is fixed and ever diminishing as a resource for food production. Land is either built on for houses or put into conservation projects, taking it out of agricultural use and thus compounding the pressures on land.