Quality farms are in demand

Bare land prices could increase 10% next year.

(Source: Farmers Weekly, 20 Nov 2009)

Farmland values in England are likely to rise modestly next year, having bottomed out in the third quarter of 2009, according to a forecast by Smiths Gore.

Head of research Jason Beedell said both bare land and equipped farms were likely to increase in value, by an average 2-3%. However this masks a big variation between the sectors.

Bare land prices increased for the first time in 2009 during the third quarter. This increase was likely to continue into next year, he said. “I wouldn’t be at all surprised if bare land goes up by 10%, based on strong demand from farmers and a good medium-term outlook for world commodity prices.”

But since September, weaker demand from non-farmer and investor buyers had caused equipped farm prices to fall for the fifth quarter in a row. This meant the “equipped premium” – the difference between bare land values and the cost of farms including houses and buildings – had dropped. “However, our feeling is that equipped values should stabilize. Market sentiment is often ahead of prices and is fairly positive for the final quarter and going into next year,” said Dr Beedell.

He predicted that equipped farm values would increase by 1-2% next year, aided by improved confidence in the residential housing market. This would boost the overall farmland market by 2-3%. Tax advantages and hope of rental growth were also driving investment demand, with the rural sector considered a safe haven for money in the current economic climate, he added. “We are already seeing increased confidence from investor buyers.”

Giles Wordsworth, head of Smiths Gore’s farm agency, expected demand for high-quality residential farms to strengthen as confidence returned to the wider economy. “The best quality farms continue to be in demand and they are selling well, often above their asking price; but lower quality farms are struggling to sell. The values of lower quality farms could stay at the current levels and may even fall further.”

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