Reality bites
Auction sales nosedived in 2016 as the banks’ tighter lending policies, falling farm incomes and the fallout from Brexit took a toll, reports Jim O’Brien
THE auction rooms of the country were quieter places this year with a sharp decline of 28pc in the volume of land sold under the hammer compared to 2015 and a similar decline in the total revenue generated by these sales.
A survey of 162 auctions held in the course of 2016 shows that while the average price per acre paid for ground in the public arena fell by a marginal 1.6pc the real story is in the volume.
Uncertainty is the word on everyone’s lips when it comes to explaining the drop in sales volumes. Commentators attribute the decline to the uncertainty in the dairy industry in particular, the uncertainty caused by Brexit, and a reluctance on the part of banks to loan money for land purchase. Many auctioneers also point to the increase in the numbers of long-term letting arrangements that appear to have eaten into the sales figures as land owners opt for letting because of favourable tax breaks.
There are many regional variations in the figures and while Connacht/Ulster appears to buck every trend, the figures in the west and north west have been skewed by the headline sale of 2016 when a beautiful 135ac farm near Oranmore in Co Galway was bought at auction by Supermac himself, Pat McDonagh for €3.2m or €23,700/ac.
The sunny southeast suffered the most dramatic declines. The counties of South Leinster saw a drop of 4.6pc in the average price per acre, with a decline of 35pc in the volume of land sold publicly, and a massive drop of 40pc in the amount of money generated by land sold at auction.
However, land in the region still commands a premium price, and at €11,528/ac beat the national average by 13pc.
Munster, which saw a massive 25pc drop in average price of land sold in the province between 2014 and 2015, showed a modest recovery in 2016 with the price increasing to €9,512 /ac or 5pc up on 2015 figure. However the volume of land sold at auction in Munster declined by 28pc, in line with the national trend.
The average per acre price for land suffered its biggest drop in North Leinster where it fell by 8.5pc compared to last year. In 2015 the average price per acre in this part of the country was €10,098 while last year it dropped to €9,238/ac. The volume of land sold declined by 21pc, while the amount of money generated in the auction room declined by 28pc.
Newbridge auctioneer Paddy Jordan said the downward trend was noticeable from early in the year. “In fact there was something of a recovery in the latter part of 2016 as sales figures published in a report in your newspaper in August showed a decline of 50pc in sales up to the end of June. The autumn season seems to have pulled things back somewhat,” he said.
Mr Jordan believes the difficulty in getting finance is a major contributory factor in the sharp decline in auction sales, “The day is gone of going to the bank manager and getting clearance to ‘bid away and we’ ll sort out the details later.’ Things have gone to the other extreme now. In fact, getting the required life insurance cover for borrowings can be a major difficulty.”
Birr auctioneer, John Ryan agrees. “The banks are valuing land on its capacity to deliver an income and not on its capital asset value. Using that yardstick and given the state of farming at the moment, the best of land wouldn’t make the price of planting ground,” he said.
Tralee-based consultant and auctioneer Eddie McQuinn has steered completely clear of the
THE DAYS OF GOING TO THE BANK MANAGER AND BEING TOLD TO BID AWAY ARE GONE
auction room this year.
“Aside from a joint agency transaction that went to auction we didn’t bring one parcel of ground for public sale in the last twelve months,” he said.
“The market is entirely too sluggish with commodity prices on the floor. Even milk, the gold standard of the industry, is after a very difficult time. I wouldn’t dream of putting a farming property up for auction in this climate, it would destroy the sale. Not even farmers with the price of land in their fist and Kerry shares in their pocket are going to jump in and buy land until the economic situation shows some signs of improving,” he said.