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Banks keen to lend to the agricultural sector

Wed 12 October 2016

In the couple of months since the BREXIT vote, Stags Professional Services have seen a flurry in secured lending valuations for the rural sector, and not, as could be reasonably expected given the climate in the agricultural sector, for those in distressed situations. To the contrary, it has been particularly noticeable that valuations are being requested for new investment projects and for farm and land acquisitions. Indeed, we at Stags are seeing that committed farm businesses with a strong asset base and balance sheet have identified that there is a benefit to cracking on with investment projects while base rates are at an historic low, and these rates can be negotiated over a long period.  

I regularly discuss land and property values with both bank managers and farmers in the early stages of these negotiations. This enables both parties to consider all available options and play around with scenarios.  This is particularly effective in situations where the farmer may wish to retain some flexibility and not provide the bank manager with security over the whole farm.  I have recently assisted in a case where we discussed land values at an early stage for a farm business that was seeking to purchase a block of land and farm buildings.   The farmer was then considering erecting a new building on the land. Together, the farmer and I were able to discuss current and projected values with the bank manager, with the result that the bank subsequently agreed to provide the necessary funding. 

The most recent RICS/RAU Rural Land Market Survey (covering the first half of 2016) reported a small decrease in demand and a marginal increase in the supply of farmland across the United Kingdom. It also noted that there had been price falls in arable land in some parts of the country, due in the main to low commodity prices. However, here in the South West land values remained firm, and figures from within Stags confirm this. Comparing figures from the first half of 2015 to the same six months of this year, our figures show that there has been no change in values. That said, values are becoming more variable, particularly in respect of location and quality and there remains a wide range in values across the region, from as little as £5,000 per acre in some areas to well in excess of £10,000 per acre in others.   This real-time, transaction-based sales evidence provided by our colleagues at the Stags Farm Agency team, enables us to provide accurate and up to date comparable evidence to support all our valuations.   

Stags regularly carry out formal valuations of farms and land for a variety of purposes, including capital gains tax, inheritance tax or for secured lending. If you would like an informal chat about how Stags Professional Services could help you, please call Toby Perry on 01392 439046.

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