Carter Jonas
Carter Jonas

Arable land more likely to be fertile ground for investors than equities

The supply of land is always finite and in recent years prices have been driven ever upwards by excessive demand compared with the acreage coming to the market. This year has started with a degree of buyer reticence but I’m hopeful of a brighter outlook by the late Spring or early Summer.

Uncertainty over Brexit and the difficult start to 2016 in world stock markets, combined with falling oil and commodity prices, could signal a high degree of uncertainty over land values going forward. But I’m more convinced that past history will prevail and we will see land values hold firm.

In the last financial crisis / equities plunge during 2008, there was a flight by investors to both land and gold but in the long term those who favoured land over bullion have turned out to be the more shrewd individuals. There is no reason to believe sentiment will be any different this time and the case for land values has been well documented in the serious press and that has not gone un-noticed.

The RICS / RAU Rural Land Market Survey for H2 2015 shows that general opinion among surveyor respondents was to report a slight fall in both arable and pasture values in England and Wales during the latter half of 2015. The actuality through analysing transaction results pointed to an overall three per cent rise to £10,064 per acre in the weighted average, statistics supported by returns from 292 reported sales from July to December compared with 197 from January to June. The average transaction size in acreage was up by a third, from 28.9 to 38.4.

As if proof were needed that land values can be resilient, arable land prices in south east England, my own area of operation, achieved a five per cent growth in the second half of 2015 according to the latest RICS / RAU survey.

While arable land in the south east rose to £10,500 in H2, in the neighbouring south west the trend reversed with a 7.7 per cent fall to £9,000 an acre. Pasture values in the south west rose by 6.6 per cent to £8,000, despite the well-publicised difficulties in the dairy and beef industries, while in the south east they also achieved that figure although it represented nil growth.

Virtually everywhere, buyers continue to show a balance between farmers, keen to purchase land in close proximity to their existing holdings, and non-farming individuals with specific, largely lifestyle but also tax-driven, reasons for their purchase.

Farmers will always seek additional land when it comes up next door and / or they are rolling over the proceeds from development land sales for Capital Gains Tax (CGT) purposes. There are clear signs that new development is gathering pace to meet the increased demand for housing particularly in the south-east. Developers have not been able to deliver sufficient housing and are coming under pressure from Central Government to do so and are now responding positively.

Non-farming individuals are attracted to land ownership based primarily upon the well-known tax benefits - a purchase can help utilise CGT relief and may also bring benefits with regard to Inheritance Tax (IHT).

Richard Liddiard

Richard Liddiard

Partner

Richard is based in Newbury where he advises clients throughout the region on rural matters but specialising in farm agency/buying and family farming structures where he is a trusted external advi...

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