Land News

Farmers likely to shape the land market in 2010

Farmers Weekly, 15th January 2010

City money made a surprising return to the English land market in 2009, helping to push arable land values back up in the second half of the year.

But, while land prices look set to build on that recovery, farming cash is more likely to be the main driver in 2010, says Charlie Evans of Strutt & Parker.

“Last year, lifestyle buyers and private investors bought 32,619 acres, or about 40% of the land on our database,” says Mr Evans. “In 2008, they bought just 19,751 acres, less than a quarter of the total.

“That might seem surprising. The popular view was that such people were hiding under their desk, waiting for a recovery.”

Instead, Mr Evans reckons bonuses, although highly taxed, put plenty of ready cash into some people’s pockets. The stock market also posted significant gains, while interest rates stayed low.

“Land is also seen as a good hedge against future inflation, one of the safest assets,” he adds. “And there was also a real lack of country houses on the market, so people looking for a rural retreat instead had to look for small farms with a decent house.”

The overall effect helped English arable land market recover some of the losses seen since 2008.

“We believe land will hold on to recent gains, mainly because of continuing lack of supply.”

In 2008, he estimates just over 112,000 acres entered the English market. Last year, the figure dwindled to 93,000 acres, an 18% drop. “Buyers had to compete, particularly in the second half of 2009, and that allowed values to recover and hold steady.”

Tight supply is likely to remain the overriding factor, he believes. Land prices could edge up by 5% over the next 12 months.

However a combination of continued low interest rates, the harsh winter and its aftermath, lowish commodity prices and electoral uncertainty is likely to have two effects, says Mr Evans.

“People won’t do much between now and May, when we are likely to have an election. So market activity will be weighted towards the end of the year. And there are likely to be fewer lifestyle and private investors about – farmers are the more likely buyers, especially if a new government introduces higher taxes as a matter of priority.”

That is likely to fuel demand for commercial farms, especially those of 500-1000 acres in good wheat-growing areas like Lincolnshire, Cambridgeshire and other nearby counties. “We could see UK farmers again counting for half the market as in 2008,” says Mr Evans.

Their overseas counterparts are now conspicuous by their absence. Given the way exchange rates have gone, you might have expected the Irish and Danish to come back in, but they are now looking at Eastern Europe.

“Overseas buyers accounted for just over 9% of the market in 2008, but less than 1% last year. I do not see that changing.”

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