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The rural property market in 2019 is just like most other markets - completely dominated by the B word, Brexit. No matter which way you voted, we all now crave for a period of stability and knowing what direction we’re going in.
British farming is second to none, operating under high welfare and quality standards, with versatility and innovation at the forefront. These characteristics act as a springboard for production of some of the world’s finest produce.
There is a wealth of younger farmers eager and keen to go farming and embark on their own ventures, with increasing numbers of new entrants to Agricultural studies from non-farming backgrounds. This drives a continual demand for farms to come to the market for sale or to let.
The present hiatus in the land market caused by Brexit which is creating pent up demand.
Sellers are apprehensive as to whether it’s a good time to sell or not? Common questions include:
Are we going to get the best price?
Is this the right time to sell?
Surely, we should wait?
Once the political direction of travel is determined we may well see more land come to the open market, but a flood of properties could also have a detrimental impact on values - dampening the average price of land through too much choice.
What is a typical buyer? In reality there’s no such person however there are external factors that influence who comes forward to buy land.
These influences include development funds, families, tax reliefs and the fact that land is a safe haven in times of uncertainty
In central and southern England, there is colossal pressure on housing with great swathes of land being built on or allocated for development. This injects considerable capital back into the hands of farmers, most of whom wish to reinvest back into farmland by use of “roll-over” relief. It’s in the DNA of most farmers to keep farming and provide for the next generation, selling part or all of their farm for development and buying a larger farm achieves this. It is this additional boost of capital that has fuelled demand for commercial sized, mostly arable, farms in the southern half of England – they are few and far between and when they do come for sale there is often competition for it. This is where land values have remained up at the £10,000 + per acre mark.
For slightly smaller, typical family farms, the picture isn’t quite so buoyant. This is where valuing land and farms becomes more of an art than a science – as one colleague said to me recently “it’s about valuing on a parish by parish basis.” This is about knowing which farmers locally wish to expand, which have no successors and so are not likely to want to buy the farm next door or who is constrained by bank borrowing and unable to bid or help push prices up in a competitive bidding situation.
The harsh economics of the livestock industry demonstrate that there’s not a lot of spare cash and so buying land may not be feasible for pure business reasons. This will limit expansion plans unless values are at or drop down to a sensible economic level.
The benign tax regime that is particular to agriculture is one that non-farming investors find attractive. They find that the ability to pass property (subject to meeting various conditions) down through the generations on a tax-free basis is a chance they cannot miss. Naturally there’s a little more to this than meets the eye but non-farming buyers can often be a backbone to support land values and keep them at a higher level than they might be.
We will look forward to a busy year seeing 12 months’ work, probably crammed into 7 months as sellers finally decide that now is the time to take advantage of high prices and availability of buying funds.
We will still be surprised where buyers come from and their reasons for buying.
We will continue to be proud of the ingenuity and professionalism of British farming.