The price of farmland in the North West continues to rise despite increase and demand falling, reports the RICS/RAU Rural Land Market Survey for 2015.
The news comes as the supply of farm land dramatically increased during the first half of 2015, but price growth for the coming 12 months is looking considerably more subdued.
An increase in the supply of farmland throughout the North West coupled with a tailing off in demand from potential buyers has not stopped prices for farmland in the region rising, according to the latest land surveys.
During the first half of the year (H1 2015), 57% of North West rural land agents reported an increase in the supply of commercial farmland, while demand for these plots significantly declined; with only 14% of respondents reporting a rise in demand for such land, compared with 60% during the second half of the year (H2 2014). Meanwhile, 43% of rural land agents in the region reported an increase in availability for residential farmland, yet demand for such farmland space also dropped in H1 2015.
However, despite waning demand, the average price of farmland in the region increased during H1 2015 to £8750 per acre, from £8250 per acre in H2 2014. Average rents for both arable and pasture land in the region haven’t altered much over the last couple of years, perhaps reflecting the weaker to many commodity markets.
Going forward, only 14% of North West rural land agents expect prices for farmland in the region to rise further over the coming year.
Craig Brough MRICS, of H&H Land & Property said: “Despite the general down turn across all sectors at the moment, land prices have continued at the previous levels. But we’ve seen an increased amount of bidder activity; with more active bidders at our auctions this year compared to last. We started the year with a good number of sales too, with both bare land and equipped holdings coming to the market. Changes to the transfer rules surrounding Environmental Stewardship will make sales more complicated and taking advice on this and planning ahead is crucial.”
Simon Rubinsohn, RICS Chief Economist, commented: “We are seeing a considerable divergence in the outlook for commercial farmland compared to land with a significant residential component. Annual average arable land rents in the UK fell by 7% during H1 and by 9.7% over the year, with anecdotal evidence suggesting the recent falls in commodity prices are the primary cause of this decline. Despite this, the lifestyle market remains relatively strong across much of the country with prices of land with a large residential component generally expected to continue moving higher.
“Political uncertainly leading up to the general election is likely to have had some further impact on the results in the survey, however, market conditions look set to remain challenging notwithstanding the outcome with the global economic environment set to remain a drag on commodity prices.”
Ribble Valley land agent Richard Turner said: “Land prices were steady up to the economic downturn in 2007 after which they jumped overnight and never looked back. Where else could you invest money in a safe haven and benefit from a 5% return with rent and rural payments? Undoubtedly prices had to level out at some point and confidence in agricultural commodities is waning with the impact of world prices and competitive discount houses. Agricultural land prices and rents have certainly levelled out but what affects the picture is development hope value, amenity value, privacy value and lifestyle value all at treble agricultural value and more. Nevertheless the inevitable raising of interest rates, however marginal, will probably calm the upper level of the market.”