12 Dec Farmland Values- A Bull or Bear Market?
Land values were under the spot light only a couple of years ago, showing growth of over 200% in the prime arable sector over a ten year period. This outstripped the growth of equities, gold, gilts and London house prices.
According to Savills, since land values increased by 12% and then peaked in 2014, prices have dropped back by approximately £1,000 per acre over the last two years, (10% in East Anglia). This is predominantly due to uncertainty around Brexit and farming subsidies, but also the risk of another general election, change of government and a potentially more punitive taxation regime.
The number of farmers buying farmland has reduced by 10% since the peak of the market in 2014, believe Strutt & Parker with the number of investors and lifestyle buyers purchasing farms over 100 acres increasing from 38% to 49% in the same period.
Within the current landscape, values are unlikely to fall much further as they are underpinned by a 20% reduction in supply of land the market in the last 12 months. Whilst investors are drawn to land due to the Capital Gains Tax and Inheritance Tax reliefs, land is likely to be a popular, tangible asset, particularly in times of economic uncertainty.
The largest differential in values is geographical. Whilst an acre of arable land in Oxfordshire (the outer home counties) can be bought for approximately £12,000 per arable acre, that same acre would cost £7,000- £8,000 in East Anglia where farmer buyers are more prevalent. Research states that average arable land values in at £9,000 per acre and pasture at £7,700 per acre, however, in this polarised market, generalise at your peril!