Funding is the crucial factor
Date of Article
Aug 26 2015

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26 August 2015, Many factors impact upon land values but none more so than the availability of funds and funding. This may take numerous guises from inherited wealth, development or compulsory purchase proceeds, accumulated funds or bank borrowing. The agricultural land sector has attracted investment from all these sources and will continue to do so.

The year to date has shown an increase of land to the market across all regions by 15% compared to this time last year, although it must be noted that this is following a record low offering in 2014.

Our market experience points to a very healthy land market which is characterised by particular hotspots. Pricing remains key and there is evidence of over-pricing leading to unsold property driven by unrealistic expectation.

One particular facet of the market has been the attraction of large offerings of commercial land without a high residential content. This has been particularly evident for lot sizes in excess of 1,000 acres.

Commercially equipped units continue to demand interest with location key to the attractiveness to potential purchasers. As output prices remain volatile, purchasers are less inclined to take on holdings where there is large capital investment required in fixed equipment unless there is a sufficient allowance made in the asking price.

A point of note is the middle market where parcels of bare land between 75 and 200 acres are offered. It is here that very careful local knowledge is required while having due regard to the quality of the land and also recognising the strength of local purchasers. We have clear evidence of correct pricing driving local interest to healthy levels for the well advised vendor.

The third tier of the market is the smaller lot size, from say five to 50 acres. This is completely quality, and more importantly location, driven from private non-farming purchasers who will always aspire to owning land. We have seen incredibly high prices for smaller parcels where competitive bidding exists and, conversely, much more commercial values where there is lack of competition.

This year, so far, has been characterised by a later market with many vendors awaiting completion of their Basic Premium Scheme applications and having one eye on the outcome of the General Election. The return of the Conservative Party has had a steadying influence on the market and nervous vendors now feel more positive about bringing their properties to the market. We have a number of interesting sales to come forward ranging from small farms suitable for the lifestyle purchaser through to large blocks of commercial arable land.

In summary, we foresee a strong market as purchasers continue to regard farmland as a safe asset that can be enjoyed from a physical perspective and provides fiscal attractions. The awakening of the wider economy has seen the development land market become more active. This has had a twofold impact on the land market, by reducing the available agricultural land in a given location and creating purchasers with funds seeking to rollover into commercial land.