Borrowers return to the land market as lenders loosen the purse strings
BORROWERS are returning to a land market which has been dominated in recent years by cash buyers.
That’s the verdict from Clive Kavanagh of Jordan Auctioneers in his review of 2018 land sales.
“Until 2016 about 80pc of land sales transacted by Jordans involved cash buyers. In 2017 and 2018 we estimate this percentage to be less than 40pc. Customers tell us that while bank lending has improved this is largely to customers with very strong enterprises, low debt levels and with firm business plans.”
Describing 2018 as ‘difficult’ Mr Kavanagh says that Jordans experienced a slow start to the season due to a combination of adverse weather conditions.
This meant that land sales were delayed from the traditional starting time of March and April to May and June
“In addition to this the fodder crisis meant both buyers and sellers were more focussed on day to day survival than making key long term decisions,” Mr Kavanagh said.
In the current land market smaller parcels are very much dependent on local interest and are hard to sell “unless you have a number of adjoining farmers who are looking to expand and willing to bid against each other,” the report stated.
Larger farms can often be easier to sell as customers are willing to relocate if the property and the price are right. In this regard Mr Kavanagh says quality is key, “considering the number of bad winters and summers experienced in recent times selling poor or marginal land is proving difficult.”
While there were some indications during the year that business people were beginning to come back to the land market,
Mr Kavanagh’s report suggests that the type of non-farming buyer who drove land sales in the days of the Tiger is not a player in the current market.
The builders and developers of the boom years who had come from farming enterprises and wanted to buy land as soon as they had made some money are no longer around.
‘Love of the land’
According to the Jordan report the new generation of business people has a clear focus on asset return and commercial viability.
“The purchase of farmland never stacks [up] on this basis and the ‘love of the land’ does not carry the weight of old “Mr Kavanagh said.
Dairy farmers are among the big players in the land market, according to the report, and the consolidation of dairy farmers is a key driver as dairy farmers seek to buy adjacent land parcels and off-load out farms.
According to Mr Kavanagh, tillage and beef farmers remain reticent about buying land, however, the report says the land market is still active in traditional tillage areas.
“In stronger tillage areas such as south Kildare the appetite still remains to expand where many farms have been built over generations and existing debt levels are low. This gives them the potential to raise the necessary capital if required,” the report said.
Looking ahead, the report points to Brexit as a real concern, and the greatest threat it poses at the moment lies in the uncertainty it generates.