Road projects drive agriland price rises
THE agricultural land market enjoyed a positive opening quarter to 2017, following a full year of price deflation over the course of 2016. The national average price of land rose moderately by 0.3 per cent in the three months to March, to reach €9,500 per acre.
In the South East, prices have grown by 1.2 per cent to €9,150 an acre, in part driven by the sale of land for new roads projects.
Aadrian Haythornthwaite from Sherry Fitzgerald Haythornthwaite in Wexford said he believed that the price rises in the South East and Wexford have been driven in part by the land acquisition activity associated with the Enniscorthy and Gorey bypasses.
‘When land is acquired for a new road, a lot on money is injected into the system, and farmers will tend to reinvest this very quickly, both because they see it as the right thing to do and also to avail of roll over relief,’ Adrian told this newspaper.
‘So in essence this boils down to two sales per transaction in a lot of cases, and both at slightly inflated figures; the first sale to the acquiring authority often has to reflect more than just the land value, because of the other matters that the CPO may need to address, and the second sale is often at a price enhanced slightly by the need to reinvest and roll over a CGT liability.’
Nationally, anecdotal evidence suggests that confidence is picking up in the agriland market, following a lethargic performance witnessed in 2016, during which prices fell by 3.3 per cent.
Falling commodity prices (particularly milk), a lack of finance, Brexit uncertainty and its sterling impact, as well as adverse weather conditions, all contributed to a dampening agricultural land sector over the course of the year.
However, recent months have seen a pickup in confidence in the sector. Farmers have been able to capitalise on rebounding milk prices by increasing production levels, which has led to stronger demand in the land market.
Prime arable land and prime grassland both saw a moderate increase in prices nationally during the opening quarter, by 0.5 per cent and 0.4 per cent, respectively. Marginal grassland values, however, were stable during the quarter, with very little uplift in demand evident for this type of land.
It’s important to note that, despite this moderate price uplift, the average value of farmland remains 2.5 per cent lower than that witnessed in the opening quarter of 2016, of €9,750 per acre.
A regional breakdown of price performance reveals that the Border and the South East regions saw the largest rise in agricultural land values in the three months to March.
Following three years where the land markets in the Border counties were quite challenged, this region saw a 1.2 per cent increase in the average price per acre in Q1 2017, to approximately €9,150. This was particularly driven by increased demand from both tillage and dairy farmers.
The South East also saw price inflation of 1.1 per cent, to stand at approximately €10,050 per acre, however, this remains 3.1 per cent lower on an annual basis.
Such encouraging signs were not witnessed everywhere. The South West region, in particular, has seen notable fluctuating price trends over the past three years. Following two years of price inflation in 2014 and 2015, land values stooped significantly in 2016, by 6.2 per cent. The average price per acre in the South West has therefore lost any ground gained during this time and is back to levels witnessed at year end 2013, averaging €9,900 per acre.
Large parcels of land in Ire- land, of 100+ acres, both including a residence and without, witnessed a moderate rise in average values during the first quarter. However, while large parcels of land without a house were 0.2% higher in the quarter, they were 1.4% lower on an annual basis. This was due to the testing year witnessed dur- ing 2016, whereby demand for larger holdings weakened and were therefore more difficult to transact.
A survey carried out amongst over 50 agents nationwide on activity in the agricultural land marketplace reveals that, positively, 25 per cent of respondents considered activity levels increased during the first quarter of 2017; this compares to 12 per cent in the same period last year.
Overall, the market is rather optimistic for the year ahead. Irish dairy farm incomes are anticipated to recover somewhat, due to a continued strengthening in milk prices, albeit mod- erately, combined with farm income support from policy developments.
Following the challenges faced at farm level over the past two years, improved profitability of Irish agricultural production will consequently improve the demand for agricultural land.