Carter Jonas
Carter Jonas

Bank pressures to swell land supply in 2016

Pressure from banks reviewing farm incomes could contribute to an anticipated increase in supply of land on the market during 2016.

Bank reviews could encourage sales of off-lying parcels of land and be motivation for the sale of farms as pressure on commodity prices drives farmers from the industry. Other sellers may be tempted to take their land profits on purchases made before 2006.

Whilst agricultural land values increased by 2.5% (Q1-Q3) this year, 2015 witnessed the lowest rate of increase since 2009, indicating that now could be the time for owners to take profits and recycle their capital.

Investment buyers driven by opportunity rather than location are still very active, creating pockets of activity that can see vastly different values in land sales only 10 miles apart.

Investors are not necessarily bad news for local farmers. While they add competition, great news for all those who own their holding, they invariably do not farm the land themselves so create opportunities for innovative contractors or opening the gate to farm business tenancies.

During 2015, Carter Jonas has dealt with 32,900 acres, both on and off the open market, with many of those sales made possible by our management teams negotiating deals to obtain vacant possession of farms prior to sales.

Across the whole of the UK, buyers are both less numerous and more focused to the investor or rollover purchaser. The farmer purchaser is less visible and tends to focus on the 50 to 200 acre blocks either over the hedge or at least quite close by. “Off market” activity remains very strong thanks to robust demand for trophy assets. 

Those buying with Capital Gains Tax (CGT) roll-over relief monies have a finite three year window to invest funds into land, which may explain why so many successful deals have been concluded in very short timescales.

As the economic recovery has now firmly taken hold, a view confirmed by Christine Lagarde of the IMF earlier this month, the development market has kick-started, increasing the volume of roll-over receipts actively seeking a home in agricultural land. This source of demand is forecast to account for a growing proportion of the land buyer profile over the next few years, usefully taking up the slack caused by the increasingly restrained purchasing activity of farming buyers. It’s still possible they could drive prime land prices to £20,000 per acre by 2020.

Across the country we have seen blocks of farmland of more than 1,000 acres sell strongly - farms with shooting interest also sell well. Of particular importance is land of all descriptions outside towns and cities where development is taking place and therefore where there is roll-over money looking for a home.

Around the regions we are reporting:

  • North – A two tier market with discerning buyers
  • South – Stabilising prices with values continuing to be driven by IHT and Rollover
  • West – Continuing strong prices with little supply
  • East – Localised markets with more land coming to the market and discerning buyers
  • Central – Strong demand for marketed properties with guides exceeded on many occasions
  • South West - More livestock farms on the market and an increased divergence between arable and pasture land prices

Tim Jones

Tim JonesFRICS

Partner - Head of Rural Division

Tim is head of the firm's Rural Division and of the Cambridge office, although he spends a considerable amount of time in London.  He has over 20 years experience in advising institutional and pri...

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