What is happening to the agricultural land property market?

It seems that almost every day we receive another report predicting the meltdown of UK agriculture and perhaps its replacement with a landscape of rewilded fields and forests but little in the way of food production.

Whilst there are always alternative views, and a strong case for arguing that the new support schemes could result in a rather more environmentally friendly face of farming, yet without significantly reducing production. The Sustainable Farm Incentive (SFI), currently undergoing pilot testing, is starting to look like a scheme which almost all farms could adopt without too much disruption, which may go some way towards replacing the existing Basic Payment as this is phased out over the next few years.

When it comes to forming a view on which interpretation of the future is more likely, two recent figures are enlightening. Both relate to the market in agricultural land. One, from Strutt and Parker, and published in Farmers Weekly earlier this year, looks at the volumes and prices of land sold in 2021 and finds that the acreage marketed was 25% below the five-year average and one of the lowest areas on record, 67% of that land was sold at or above the guide price and the top price for arable land was £15,300/acre and £13,000/acre for grassland. Most arable land made £8-10,000/acre. These figures only include land publicly marketed, so the significant number of private sales will not have been reported, but nonetheless, despite all the current uncertainties they indicate that there is still an appetite for acquiring land, and presumably a certain degree of optimism about the future.

A snapshot of the rental sector, this time from 2020 was published by DEFRA. This shows that average AHA rents rose by 5% in 2020 to £75/acre and FBT rents by 8% to £97. The picture is not uniform across the country, with AHA rents in the Southwest, for example, falling by 6% but rising by 21% in the Northeast. As usual rents tend to be higher in the East at £100-120/acre compared to £89-100 elsewhere. The full survey can be found at https://www.gov.uk/government/statistics/farm-rents/farm-rents-england-2020

Commenting on the issue, Monahans agricultural partner Andrew Perrott remarked “Both sets of figures need to carry a certain degree of “health warning”. The land sales are based on a small sample and may reflect the small amount of available land and perhaps the special circumstances of buyers. They also are based only on land publicly marketed, so the significant number of private sales will not have been reported. On the rental side, the figure is now well over a year old, so to that extent lags the impact of recent events such as price rises. Nonetheless, despite all the current uncertainties both reports still suggest an appetite for acquiring land, and presumably a certain degree of optimism about the future”.

To discuss this further, please contact Andrew.