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As Spring arrives, Associate Partner, Andrew Ranson, of Stags Farm Agency Department considers the market expectations for Cornwall's farms and land market for 2021.
National reports vary slightly, but the trend suggests that land supply was back to about 50% of the 2018 level! This is unlikely to surprise many. Much of this reduction in supply was caused be the disruption of the first Covid lockdown which subsequently only saw a partial recovery in the second half of the year. During 2020 Stags Farm Agency sold 16 farms and 68 land lots with a combined value of £26 million. On analysis, throughout Cornwall and along the Devon borders, this comprised a larger proportion of small, often residential farms, with a reduction in bare land opportunities.
The more commercial sized blocks of land and farms are seeing demand continue to be driven by often local, commercial farmers and agricultural businesses. For those businesses committed to the industry, when a suitable conveniently located opportunity comes available, it is regarded as “not to be missed”. Record low interest rates and an appetite from lenders to lend, only increases the lure. In spite of many buyers sometimes initially struggling to justify the values to themselves, they remind themselves that you rarely meet land owners who regret a past land purchase, unlike those who missed an opportunity!
We have also seen an increase in investors buying blocks of land. In December and January Stags were involved in 2 sales of sizeable blocks of bare land, both in North Cornwall, to ‘non-farmer’ buyers whose principle motivation were both driven by Capital Taxation. Also, with the increase in land being sold for development, and with constrained supply levels, Stags are seeing demand from buyers with ‘Rollover funds’ influencing the local market in some areas. It will be interesting to see if anything, the budget alters this.
Interestingly, with the shift in Government support policy since Brexit, moving towards a reduction in production support toward “Public Monies for Public Good” Stags are seeing greater demand for marginal land from buyers with an interest in the environment and conservation. Some are interested in “Re-wilding” or in planting or managing woodland for Carbon off-setting and trading Carbon Credits. Interestingly, just last month Andrew agreed a sale of land in Mid Cornwall at 30% over guide to a local developer wanting prime agricultural land to use for ‘environmental offsetting’. In spite of the relatively higher price of better quality farmland, it “scored higher benefits” than a similar acreage of more marginal land.
Smaller land parcels and small residential farms continue to attract “non-farmer” interest. As well as equestrian buyers, we have seen a dramatic increase in demand from “distant lifestyle buyers” wanting to escape to their own piece of England, or their more rural home, during the current pandemic. One small land lot on the Cornwall Devon border was put under offer very quickly last month, after a buyer, who had missed two other recent opportunities, undertook a round trip from Buckinghamshire, the day after the land was launched and immediately offered more than 25% over guide!
Usually over the winter, the activity levels in the farms and land market becomes almost dormant, but recently we have seen a surge in sales, with very few opportunities now available. The number of buyers who registered with Stags in January was up 52%, and the amount of sales under offer, was up 139%. Whilst the number of properties for sale was down by 32%.
The other side of the coin, “supply”, continues to be very constrained and probably the most significant market factor. As already mentioned, farm and particularly land supplies were considerably disrupted due to Covid during 2020. It might be logical to expect it to balance out, with all the sales that didn’t happen in 2020 to be added to a ‘normal’ level of supply for 2021. I would love this to be the case, but experience dictates that it rarely is!
Often when talking about the supply of land and farms the “3 Ds” are mentioned: Death, Debt and Divorce. These continue to be significant, although Covid has not affected agricultural incomes as it has done many other businesses and with severe delays in legal proceedings we have seen less pressure to sell due to debt and divorce. Whilst Brexit has happened, many of the consequences remain uncertain and in times of uncertainty, regularly the easiest option is to just carry on.
One of the proposals, yet to be implemented, under the new Post Brexit agricultural policy is the Retirement Incentive that involves rolling up remaining BPS payments up until 2027 and capitalising them and taking them as a lump sum. Some retiring farmers are considering this and holding off retiring until this opportunity is available, which is likely to be within the next 2 years.
Stags are expecting to be bringing numerous land lots to the market soon, perhaps a little earlier than usual, with farms following soon after.
Land values have remained fairly consistent during 2020. Constrained supplies have maintained values in spite of high levels of uncertainty.
Farmer sized parcels of ‘average pasture land’ across Cornwall and along the Devon borders tends to achieve £6,000 to £7,000 per acre, with the poorest rarely falling below £5,000. Better, arable land regularly achieves £7,000 to £8,000 per acre; and larger woodland, £4,000 - £5,000 per acre. Smaller land lots average £45,000 to £55,000 for an average 3-6 acre sized parcel, with values currently creeping up. All to often, exceptional demand pushes prices to a level that surprises everyone. The outlook for 2021 looks very positive with continuing higher levels of demand relative to supply.
Contact Andrew Ranson (01566 774999), to see what your farm or land is worth and for a confidential discussion on how to achieve the best result for you.