Brexit hangs like a black shadow over farm values
While the historic trend for both farmland sale and rental values has been generally upwards, the last couple of years have seen this growth stall – and the long-term trend is currently unclear.
Claiming that Brexit was adding to short-term uncertainty, an assessment of the market by the farm consultants Andersons stated that while any outright collapse in values was unlikely, buyers were becoming more selective in what they paid for.
Senior consultant George Cook said that the market indicated that the difference between parcels of land in more “desirable” areas and those in less accessible locations continued to widen.
“The best land can still sell well, especially when there are a number of serious interested parties,” he said.
“But vendors of secondquality farmland are being disappointed by the offers received and, in some cases, have been unable or unwilling to sell.”
Adding that the coming year was likely to see some continued ”softening” of the market as buyers became more cautious, he admitted that the profitability of farming had little influence on land prices, but added: “Even so, the uncertainty over trade arrangements and the direction of support after March 2019 is already influencing sentiment and will continue to do so.”
The availability of cheap loans and the tax advantages of owning farmland had been major factors in buoying up the price of land – but there were signs that the cost of servicing any debt might rise.
“And if a hard left government under Jeremy Corbyn was to be in power the existing reliefs such as Agricultural Property Relief may be under threat. Whole new taxes such as property or land tax may be dreamt up,” he warned.
And Will Dalrymple of Strutt & Parker told a farmers meeting in St Andrews this week that Scottish sales had broadly mirrored the slow-down seen across the UK – with prime agricultural land still moving fast while smaller, more marginal farms had been more difficult to move:
He said that while the past year had seen a 50 per cent drop in the number of Scottish farms sold, the strongest demand was for prime arable and wellequipped farms extending to more than 300 acres.
Stating that there was nothing particularly unusual about only 38 of the 52 farms coming on to the market remaining unsold, he put the reluctance of farmers to market their farms down to uncertainty over Brexit and the future of subsidy payments.
“I think many farmers are reluctant to make decisions at this point and are waiting until they know more,” said Dalrymple.
But a potential reduction in subsidies was likely to have some impact on the farmland sales market, particularly arable, and he said this could lead to an increase in farms coming to the market.
“However, wellequipped, prime arable land is likely to remain scarce,” he said – but, looking to the future, he added that diversified and mixed farms with a broader spread of enterprises could prove more resilient than arable units.