Making money: what the experts think
Down on the farm
British farmers seem to have lost interest in buying land, said James Pickford in the FT. According to estate agent Strutt & Parker, the share of purchases made by farmers, which traditionally hovers around 60-65%, has dropped to 50% in the past six months. Meanwhile, the proportion bought by “private investors and lifestyle purchasers” has jumped. Strutt & Parker cites two likely reasons. First, Brexit uncertainty: particularly on the question of what may replace the EU’S agricultural subsidies regime, which is “key to the viability of many farm businesses”. Second, price. Investment farmland has risen “stratospherically” in recent years, peaking around 2015 at about £10,000/ acre and pricing many farmers out. The upshot is that “more than one-third of the farms on sale in 2017 are either still on sale or have been withdrawn”.
Winners and losers
Private investors, less affected by the ins and outs of Brexit negotiations, tend to see land ownership as a tax-efficient way to increase the diversity of their portfolios. And “GB farmland remains an attractive investment”, observed Savills in a recent paper. It predicts that the market is “likely to strengthen over the next five years”, assuming short-term uncertainty fades. But there will be winners and losers. “Holdings with a range of income streams will be sought after, while commercial units with little scope to diversify could encounter further downside risk.”
Polarisation
In fact, “the market remains incredibly polarised”, with location and farm type, rather than land quality, “the key drivers of the price achieved”, according to Michael Fiddes of Strutt & Parker. Cereal farms are selling better than dairy or mixed farms, and demand for big holdings – of more than 1,000 acres – is higher than for mid-sized plots. In the past six months, prices have ranged from £6,800 to £15,000 per acre, but where farmers are the predominant type of buyer, they’ve softened. Private investors may “stoke demand in more attractive areas” – or take “a punt on the potential for future building development” in likely locations, said James Pickford. For now, they’re in the driving seat. Strutt & Parker expects “the proportion of buyer types” to remain roughly the same for the rest of the year.