What really is the outlook for farmland values? EE-I-HIGH-OR-LOW?

dopester

I don't really get what a lot of the "experts" have been saying.

Or at least I've got my own reasons for total disbelief at forecasts which suggest values seeing ever higher rises even into 2015.

It's Liz Jones, with her (smallish) farm (50 acres) up for sale in Exmoor that had me rethinking about this. She's recently lowered her asking price by £150,000 to £1,795,000.

I'm expecting farms like her to take massive hits in value over the next few years, mega crash... but am I wrong? I'm genuinely asking here. Is there something I'm overlooking?

I admit to have been unaware of the supposed big gains in farmland value of this year, until recently. Also I know HMRC didn't get too heavy with their review of farm land tax-breaks recently, but I've got no knowledge what is in store re EU subsidies or anything.

LAND Gazette
Farmland values to rise
Written by John Vaughan
Tuesday, 12 January 2010 08:34

Continues with the bubbly future forecasting here.

Agrimoney.com
Farmland prices hit record high in England
31st March 2010, by Agrimoney.com

Farmland prices have hit a record high in England, and look set to keep appreciating – even if the forthcoming general election results in the widely-feared hung parliament.

Farmland values rose by 5.4% in the first quarter of 2010 to £5,397 an acre, property consultancy Knight Frank said.

continues on this link...

PROPERTYWIRE
Farmland prices expected to rise in 2010 as strong demand drives market, especially from overseas
Thursday, 22 April 2010

The average price of farmland in England is at its highest for years as demand for land as an investment remains strong and growth is driven by a shortage of supply and increased interest from overseas buyers, according to analysts.

While the latest report from consultants Knight Frank shows that English farmland values rose by 5.4% in the first quarter of 2010. This takes growth over the past 12 months to 15.5%, with the average price of farmland now £5,397/acre, the highest level recorded by the Knight Frank index.

It says that prices are being driven up by a continuing shortage of supply and increased interest from overseas buyers and investors. The amount of farmland publicly advertised for sale so far this year has fallen by almost 20%.

According to Andrew Shirley, head of rural land research at Knight Frank values are set to rise further this year. ‘The strong performance of the English farmland market that we saw at the end of the last decade has continued this year. We predict they could rise by a further 10% during the rest of 2010,’ he said.

‘Investors, including those from overseas, are becoming more active in the market and, along with lifestyle buyers, accounted for virtually all of Knight Frank’s farmland sales so far this year. Despite its recent price growth, the ongoing weakness of Sterling means property assets in the UK look very good value to those buying in other currencies,’ he explained.

‘Interestingly, there appears to be no pattern in the location of overseas buyers, unlike the last decade when we saw large numbers of investors and farmers from Ireland and Scandinavia in the market. Buyers this year have, so far, come from countries covering three different continents,’ he added.

continues on this link

SMITHSGORE (Rural Property Managers)
Farmland values climb to milestone high but are we nearing the top of the market?
July 2010

“The farmland market reached a milestone high as average bare land prices hit £5,000 an acre for the first time. We had forecast this in our mid quarter figures and it has now been confirmed by the quarter end results” reports Dr Jason Beedell, Head of Research.

The reason is simply supply and demand. Prices continue to rise as the supply of land to buy remains low and demand remains strong – particularly from farmer buyers.

The lack of supply driving up competition is becoming a vicious circle. Before the 1990s around 4% of land would be sold in a year – so on average farmers knew that there would be an opportunity to buy neighbouring land once every 25 years or so. Now, as the volumes of
land traded have dropped so much, the opportunity might only happen once in a lifetime.

Bare land prices rose to £5,100 per acre, up 6% between April and June, and are now up 7.5% over the last year. This continues a three year trend of rising prices. 7,500 acres were for sale in the quarter, 17% less than in the same period in 2009 (9,000 acres).
The strength of the market for land is highlighted by the relative weakness of the market for farms with houses and buildings.

While bare land values have risen 7.5% in the past year, the value of equipped farms has only risen by 2%. This is because of the weakness in house prices which are often a major element of the value of a farm and non-farmer buyers being more affected by the recession. Buying the ‘average’ lot of bare land costs around £700,000 (for 139 acres) while the average farm with house and buildings is £1.8m.

continues on the PDF from Smiths Gore's introduction page

Really2

Ok, small time farming in the true sense would be hard to make a return on if you ask me.
But (as you may have guessed)

I go fishing, many small farms now offer many other thing,
One farm near me still do dairy farming etc, but also store caravans and charge £6 per person to fish one of their 3 pools.

I know of another farm that does the same but without the caravans that has 11 pools.

Another that still farms, but also breeds parrots (hand reared birds are £750 - £2500+).

The main thing they have they have access to land other businesses simply do not have and planing permitted can make a very good very diverse business.

So yes small time farming would be hard, but the land can enable growth in other areas of business.

The last part is perhaps barn conversion.

But looking at the land values - farm house costs, it looks like a fair amount of purchases are not as business minded EG rich people with the cash who want a new life in the country.

Generali

There is one tremendous advantage to investing in farmland: you pay inheritance tax on only half of its value.

Also, a farm on Exmoor will have a scarcity value in that the house is in a National Park and they are sought after.

FTBFun

Generali wrote: »

There is one tremendous advantage to investing in farmland: you pay inheritance tax on only half of its value.

Also, a farm on Exmoor will have a scarcity value in that the house is in a National Park and they are sought after.

Its actually 100%! I think you're thinking of business property relief which is 50%?

chucky

dopester wrote: »

I'm expecting farms like her to take massive hits in value over the next few years, mega crash... but am I wrong? I'm genuinely asking here. Is there something I'm overlooking?

for me there are two things to this

the UK will have to produce it's on food more and more in the future so it will need more farm land due to an increasing population.

the UK has a housing shortage and an increasing population that needs more houses built.

they both cannot really happen together without one or both increasing in demand and value.

Generali

FTBFun wrote: »

Its actually 100%! I think you're thinking of business property relief which is 50%?

That's what I thought then I looked on the HMRC website and 'corrected' myself incorrectly as it turns out! Doh!!!

Nosht

Farmland fluctuates but usually when prices rise they take a long time to come down.
Farmers would rather go bankrupt than part with land.

N.

purch

Also, a farm on Exmoor will have a scarcity value in that the house is in a National Park and they are sought after

Farms, and especially the larger properties with less than 150 acres, are not selling currently, and prices are definately softer.

Generali

purch wrote: »

Farms, and especially the larger properties with less than 150 acres, are not selling currently, and prices are definitely softer.

I have a couple of mates that are farmers and they reckon that you need a big farm to make money these days.

Presumably, people buying the small places are hobbyists and people looking to make money from a niche (eg very good farmhouse cheese).

ninky_2

Really2 wrote: »

I go fishing, many small farms now offer many other thing,
One farm near me still do dairy farming etc, but also store caravans and charge £6 per person to fish one of their 3 pools.

I know of another farm that does the same but without the caravans that has 11 pools.

Another that still farms, but also breeds parrots (hand reared birds are £750 - £2500+).

this stuff really !!!!es me off. i don't mean to attack the individuals because of course they are going to maximise their revenue streams but what annoys me it the whole gradual transference of agricultural land to non food production uses (and i'd include equine in that) in order to turn a private profit.

the whole reason for stealing land from the rest of us in the form of taking common land and giving it to private landowners was the idea that it would be more efficient at producing food. it was not meant to be to turn a private profit (that was supposed to be a side benefit and motivator for food produciton). either this land is required for food production (in which case the landowners should be forced to use it for this) OR it is surplus and should be turned over (compulsory purchase or whatever) to the rest of us. leisure fishing should be free (or minimal cost to cover maintenance and check not over fished), camping on land should be free. there is nowhere left to enjoy in this country without paying through the nose for the (overcrowded) privilege.

in the words of joni mitchell....you don't know what you got till it's gone...they paved paradise and put up a parking lot.

Really2

ninky wrote: »

this stuff really !!!!es me off.

TBF the place where I fish the guy looks a lot less than 300 years old.
Also he is still farming the land? so what if he uses 4 small padock size fields to keep the business afloat.
I dare say if we never imported food he would not be doing it, but unfortunatly times have changed.