Brexit won’t diminish appetite for farmland
The Brexit result has certainly put farmland under the microscope again as it was during the 2008 banking crisis, when individuals and property funds saw farmland as a safe haven.
Banks are already expressing a strong appetite to lend to agriculture, which reinforces the special nature of farmland. As always, the best in class will continue to be highly sought after and the market remains positive.
Since the latest RICS / RAU farmland survey was compiled to cover the first half of 2016, the UK Treasury has announced that payments to farmers under the Basic Payment Scheme, funded through EC payments, would continue unchanged, although there is a degree of uncertainty over the future of some environmental stewardship schemes to be initiated after the Autumn Statement from Chancellor of the Exchequer Philip Hammond later this year.
The Chancellor has promised BPS payments will continue until 2020, at which time BPS would have come under review whether or not we were to remain in the EU.
So there is no less clarity now than there was before the historic referendum outcome in June, meaning investors are unlikely to be deterred. What’s probable going forward is that payments will be based more around environmental protection than production, possibly favouring smaller farms in sensitive places rather than larger land holdings.
But investors recognise that there will always be a call for agricultural output so their investment will always earn its keep either through investors taking the farms in-hand or through letting to tenants or via a contracting arrangement. Future regimes regarding inheritance tax are most likely to be the biggest influence over how land is managed.
Around the regions, these were the views expressed by my Carter Jonas colleagues who contributed to the survey:
Mark Russell MRICS, Cambridge: “The first half of 2016 has been restricted by the EU Referendum debate with most potential purchasers being unwilling to commit to an offer before knowing the outcome. Effectively this hiatus has had the effect of lowering prices with only those deals that look good to the buyer, in a recent historic context, completing. Off the market deals continue to be at a higher level and reflect the purchaser’s interest in securing a particular parcel of land.”
Sam Johnson MRICS, Harrogate: “The on-going commodity price slump coupled with the uncertainty generated as a result of the EU Referendum has left the land and farm market for the north of England delicately balanced during the first half of 2016. Despite now having certainty in the result of the EU referendum, there is no greater certainty on how a Brexit will impact on the land and farm market generally as well as the larger agricultural industry. In the north of England we have seen a greater supply to the market and whilst there is undoubtedly continued demand in the market, this demand is a lot more discerning with a growing divergence in prices achieved. Purchasers with rollover money are continuing to come forward and remain keen to invest in farmland taking advantage of the peripheral benefits owning agricultural land offers.”
Edmund Smith MRICS, Oxford: “The first half the of the year has seen a similar supply of land to H1 2015 and prices have maintained at similar levels with location and size still the key drivers. A period of uncertainty will surely follow the referendum result but for many, the reasons for buying/selling will remain the same and a strengthening of commodity prices might help to allay concerns about CAP. The relationship of supply and demand will ultimately determine price and it is expected that these will continue at similar levels, at least in the short to medium term.”
James is a partner who heads up Carter Jonas’ South West rural operation, managing the teams in the four offices of Marlborough, Bath, Taunton and Truro. He primarily works out of the Taun...