Farms and farmland to carry on rising
in value, expert predicts
A relatively short supply of farmland, combined with a growing purchaser profile, will lead to a continued growth in agricultural land values, according to Penny Dart of Savills Farm Agency in Exeter.
RESEARCH shows that the average value of farmland across Great Britain increased by 14.9 per cent last year, which puts the cumulative growth since the beginning of 2004 at 50 per cent.
Now average values for all types of farmland are above the peak recorded in the mid-1990s, when farm profitability was high.
But growth has been most significant in the grassland sector, where increases of 41 per cent and 63 per cent were recorded for medium and poor-quality pasture respectively. These greater-than-average increases were largely explained by the strong demand from the lifestyle buyer for farms located in picturesque locations, which most commonly are livestock units.
Our research shows that farmer activity on the buying side increased for the third successive year. Fifty-one per cent of all buyers in 2006 were farmers compared with 49 per cent in 2005. Analysis of the motivations behind this increased activity showed that expansion at 64 per cent was the principal reason behind a purchase, while another 20 per cent were relocating.
Lifestyle buyers, who have accounted for as much as 40 per cent of all purchasers in recent years, reduced to 30 per cent during 2006 following increased competition, but still remain a major feature of the market and a proportion of the latest City bonus pot is predicted to find its way into rural property this year.
Investment played a greater part in the market, with 16 per cent of purchases solely for this purpose. During last year we saw an influx of overseas buyers, who were involved in 20 per cent of all deals, including the Danes who represented nine per cent of all purchasers, but for farms of over 500 acres this proportion was nearer to 40 per cent.
Looking at the means of purchase, cash sourced from previous sale proceeds has been steadily increasing during the past five years, and last year was used by 25 per cent of all purchasers compared with ten per cent in 2002.
Analysis of farm transactions where we were involved shows that the proportion of farmers selling last year was higher than for a few years at 62 per cent, compared with 54 per cent in 2005. Last year almost 30 per cent of all vendors cited retirement as the reason for selling. Of all farmers selling, 40 per cent were retiring, compared with 33 per cent in 2005 – suggesting that retirement is now a realistic alternative to continuing farming, especially where there are no family members to succeed. Also 4.5 per cent of all sellers were planning to move overseas.
