Farmland in demand
The value of agricultural land continues to soar, with buyers battling for the best properties, but as more assets come to market, what are the prospects for the remainder of 2022, asks Rupert Bates
Agricultural land values in England have reached their highest level for six years, with many farms and estates selling for more than the asking price. According to Strutt & Parker’s Farmland Database, which chronicles all farms and estates over 100 acres publicly marketed in England, the average value of arable land is £9,500 an acre – up £100 an acre since the end of 2021. “Land values continue to march upwards. The average value of arable land is now 2% higher than a year ago and not far off the values seen at the peak of the market in 2014-15. The average value of pasture is £7,500 an acre, which is also 3% higher than 12 months ago,” says Matthew Sudlow, head of UK estates and farm agency at Strutt & Parker.
“High values are being fuelled by strong demand, coupled with a shortage of farms and estates up for sale. Demand continues to outweigh supply, leading to stiff competition for the best properties. We are seeing some properties sell for well over their guide price and are hearing of some sales in hotspot areas where buyers are resorting to gazumping.”
More land is expected to come to the market this year to feed pent-up demand for farms and estates as Covid restrictions are removed, with rising prices enticing landowners reaching retirement age and with no successors to sell. “Farmer buyers may take a more cautious approach, mindful of the impact of soaring input costs and the phasing out of Basic Payments on farm margins. However, there is still plenty of rollover money to be spent and environmental investors are starting to become more active in some areas. Demand for residential farms with a manageable acreage also remains extremely strong, although interest levels do depend on the quality of the house,” says Sudlow.
Savills also reports continued strong demand for UK farmland in the face of short supply, but warns that the process of completing a farmland sale is taking longer than normal, with the average time from launch to exchange around 420 days, due to the complexity of transactions. “Those considering a sale should strive to be well prepared, have all the necessary paperwork together and choose their advisers wisely. Purchasers need to be patient,” says Alex Lawson, head of Savills’ rural agency group. Inflationary pressures are causing prices for animal feed, electricity and fertiliser to soar, says Lawson, impacting heavily on the livestock sector. “But some arable profit margins have improved due to the increased output prices for crops.”
The Lump Sum Exit Scheme will impact how land is brought to market this year. But there remains strong demand, with Savills reporting 39% more applicants registered on its database in the first three months of 2022 than 2020, with those interested in farms over 50 acres registering more than £560 million to spend.
Emily Norton, head of rural research at Savills, says: “Given the range of assets coming to the market this year, it will be an interesting test of the appetite for more traditional farming investments, away from the natural-capital investment narrative of the past few years. If supply increases because of exit schemes, or more likely due to policy-change fatigue or concerns over production risk, 2022 looks set to be a busy year for the farmland market.”