Jack Mitchell from Humberts’ Rural team, comments on the latest RICS/RAU Rural Land Market Survey, showing that for the second half of 2015, there was an increase in the supply of farmland coupled with a reduction in demand:
“2015 saw commercial farmers become increasingly selective as a result of reduced annual farm incomes and some rising levels of debt within the agricultural sector. Although increases in supply alongside falling demand should in theory result in falling prices, this is not always the case.
“The farmland market is very localised and there are many farm businesses still looking to expand when the appropriate opportunity arises. The price divergence within the market continues to grow; location often plays more of an important role than land quality in dictating the final sale price.
“In line with the RICS findings, in 2015, just 25% of the holdings we sold were to traditional farming businesses. A further 37% of purchasers comprised mixed, predominantly rural, businesses (with an already established farming component). The remaining 38% comprised lifestyle type purchasers; we have seen a slight increase in interest from such purchasers who continue to seek privately situated residential farms, in accessible locations and withgood schools nearby.
“Looking ahead to 2016, we do not anticipate any considerable price growth: we expect to see low commodity prices continue to hamper confidence and some purchase decisions but we anticipate that this will be contrasted to some degree by the longer term view taken by many farming businesses when acquiring adjoining property, together with the presence of a number of high net-worth individuals within the farmland market and the continued amount of rollover money and associated tax driven purchases within the market.”
