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Much has been written about the potential impact of Brexit on the farmland market, but our experience at Stags Farm Agency is that there is no common theme, and that every sale and purchase brings its own set of circumstances.
The frame of mind of buyers appears to be influential to values in some cases where we are seeing caution from those concerned about what may happen in a few years’ time after the UK has left the European Union. The most common concerns revolve around what will happen to farm subsidies and farm gate prices, and where agricultural commodities can be exported to.
That said, we are also seeing optimism among buyers regarding the recent improvement in commodity prices and the possibility of subsidies continuing as they are until 2022. With land supplies remaining tight, these buyers appear willing to take the opportunity to expand.
In 2017 so far, Stags Farm Agency has sold four commercial blocks of farmland, providing a good illustration of the state of the South West land market:
•124 acres of quality Grade 1 and Grade 2 land near Budleigh Salterton, which was brought to the market in January 2017 and sold in excess of the guide price of £9,000 per acre. Among those interested in this land were institutional and investment buyers, but it ultimately sold to local farmers looking to create a new farming unit.
•120 acres of arable and pasture land near Kingsbridge, which sold for in excess of £8,000 per acre, with interest coming from local farmers looking to expand, regional buyers seeking accommodation land, as well as those wanting to rollover Capital Gains Tax relief.
•100 acres of arable land near Eggesford sold for in excess of £8,000 per acre, which generated interest from both farmers and investors.
•80 acres of arable land in North Devon, which sold under the guide price of £6,000 per acre to a nearby dairy farmer.
(i) There is genuine interest from farm buyers looking for land to expand in order to protect the long-term viability of their farming businesses into the next generation.
(ii) Funding is a combination of rollover money as well as bank finance, proving that banks are still prepared to back those with strong, diverse farming businesses.
(iii) Farmers are prepared to invest in the long-term future of their farms, in order to gain economies of scale and enable them to generate an income from a smaller margin.
(iv) There is widening variation among prices of up to 55%.
(v) Local interest is key, with neighbours often adopting the view that an opportunity to buy land may not arise again in their lifetime.
The land market is driven by supply and demand. At present we have a dearth of supply, which reflects the stoicism of farmers and their refusal to panic at the prospect of our departure from the EU. Banks remain broadly sympathetic to farmers and are continuing to support farm businesses that wish to expand. We are seeing only a few distressed sales.
On the demand side, land buyers appear keen to purchase, often to safeguard their long-term future operations. Whole farm buyers, meanwhile, are a rarer breed, often finding good reasons to put off a whole farm purchase due to political uncertainty. The exception is where there is a need to replace a farm lost through development or compulsory purchase.
With a balanced demand and supply, land prices will remain firm. Looking further into the future I expect there will be a shortage of land and farms coming to the market this autumn, which will probably satisfy the current demand.
Please call George Alder, Head of Stags Farm Agency, for a confidential discussion about the farming market on 01392 680059.