Rural Report 2017: As Brexit looms how are farmland markets preparing?

England

Clive Hopkins

Head of Farms & Estates

Since the beginning of the year many of the farms or estates that had been on the market for some time have been sold, so the current trend really is a shortage of stock. Buyers seem to have got their heads around Brexit, but vendors are more cautious about selling unless they really have to. This is reflected in values by type with our Farmland Index stabilising in the first three months of 2017, following a drop of 8.5% last year. The average value of bare farmland is now £7,435/acre, according to the index. A 760-acre block of arable land in Oxfordshire is currently attracting offers of around £9,500/acre.

However, looking forward it is hard to predict the longer-term impact of Brexit. The real issue that will affect values is supply. Although most farmers I speak to have come to terms with the fact that by 2020 agricultural subsidies will be much diminished, I do expect that more of them will decide to call it a day in the coming years.

I think the market will stand a limited increase in the number of farms for sale, in fact prices could be higher for those that bring their units to the market early, but if interest rates rise hastening the trend, prices will start to suffer. We won’t see the huge drops experienced in Ireland following the financial crisis, but it’s not inconceivable that average values could settle at around £6,500/acre until supply and demand comes back into balance. After that I think we will see prices begin to increase steadily again.

Scotland

Tom Stewart-Moore 

Scotland Farm Sales

Last year the Scottish farmland market remained fairly resilient despite the Brexit vote – average values fell by just over 3% to £4,223/acre, according to our Scottish Farmland Index. In 2016, 71 units priced at £1m or more were launched in Scotland, totalling just over 30,000 acres. Nearly 80% of this stock is now sold or under offer. Looking ahead it doesn’t seem that 2017 will bring a flood of farms for sale. The market faces challenges, but we have been saying that for a while. The prospect of only two more years of the current Basic Payment Scheme for farmers in Scotland is now becoming a reality. There remains a big question mark as to how both the Scottish and UK government are going to support farmers going forward.

However, despite all of this, the early signs so far this year suggest that there is still a strong appetite for farms. Interestingly, the first few months have seen two large farms sell privately for premiums in the Scottish Borders, which shows the health of the marketplace. We expect large, well-equipped farms to continue to sell well. The market will remain price sensitive so pricing is key. We have a book of active buyers looking to invest, including farmers wanting to expand or relocate and investors looking to take advantage of the tax benefits of ownership.

Wales

Hollie Byrne

Regional Farm Sales

Farms in Wales are the most dependent on subsidy payments and agri-environment schemes of any region in the UK. There is therefore a certain amount of trepidation about the shape of the new home-grown agricultural policy that will take the place of the EU’s Common Agricultural Policy. So far we haven’t seen a huge impact on prices; mainly because Welsh land values never hit the peaks seen in England and Scotland. Topography is such a limiting factor here that regardless of commercial acumen it is very difficult for farming businesses to be highly profitable. Looking forward some people are pessimistic about where values will head if the financial support for farming is cut back, but I believe the Welsh Assembly will be fighting strongly to make sure this doesn’t happen. It firmly believes that support for agriculture is support for the wider social fabric of rural communities and their economies. Payments for agricultural activities may well be cut, but they could be replaced by schemes promoting rural enterprise, the environment, biodiversity, water quality and carbon sequestration to mitigate the impact of global warming.