Big jump in farm sales follows CAP news

Following the uncertainty created by CAP Reform which caused many buyers and sellers to sit tight in 2014, the first quarter of 2015 has seen a big jump in farm sales, says James Butler of Strutt & Parker.

Average farm prices have risen 12% in the past year and South East region closing gap with East of England.

“CAP Reform has now reached a stage where buyers are prepared to commit to a purchase as they have the confidence that they will obtain a Basic Payment during the next 5 years," said Butler.

"This means that they have a better understanding as to what their annual payment will equate.

The uncertainty created by CAP Reform had little impact on the arable market in 2014 due to the limited supply. However, with margins tight in livestock farming and with a greater number of grassland farms to choose from, buyers were holding off with a purchase until they had the confidence that the Basic Payment Entitlements can be secured”.

All six of the Strutt & Parker sales are to buyers from outwith Scotland and include a combination of investors and farmers. These buyers are attracted to Scotland due to the lower average land values than in England and Ireland, and the opportunity to get a bigger acreage.

James Butler concludes; “We expect momentum to build up in the farmland market as we pass 15th May 2015 which is when vendors can transfer Entitlements. In addition, the Basic Payment Scheme will continue to bed in and buyers will have the certainty that they can obtain Basic Payments. This will fit in with our usual busiest time of the year in the lead up to the Highland Show in June”.

Average arable land prices are now £9,809 per acre, a rise of 12% over the past year. The South East region, which includes Oxfordshire and Hampshire is closing the gap with East of England which has traditionally maintained strong land values.

The review of sales in the first three months of this year also shows that the average size of farm has increased to over 400 acres, compared with under 300 acres three years ago. Another notable change in the statistics is the significant increase in the supply of land to the market. This is 23% higher than the 5 year average.

Will Whittaker, of Strutt & Parker’s Estate and Farm Agency, says: “Looking ahead, we remain confident of a steady increase in land prices. We expect a brief pause in market activity whilst the election takes place, with the long term average trends to be maintained throughout the next quarter”.