27 November 1998

Autumn prices declining

By Louise Rose

RESULTS of land sales this autumn are showing signs of a downward movement in prices with former high price levels only achieved for exceptional reasons.

"A two-tier market is beginning to emerge and purchasers are not bidding as strongly as earlier in the year for land and farms which are not of the best quality," says the property market report recently published by the Valuation Office.

However, in some areas the market is supported by purchasers wishing to buy a house in the country and by bidders with non-farming or rollover money.

The England and Wales averages of reported values for each sector of the land market for the past six months show a 4% reduction on arable farms with dairy, mixed and hill farms unchanged, but some distinct regional variations are apparent (see table).

In some of the areas where auction is a preferred method of sale the volume of land offered by this means has fallen.

"Less agricultural land has come onto the market in the north west during the last six months and fewer holdings were offered by auction than over the previous two years except in Cheshire where some dairy farms sold successfully in the summer," it stated.

Here values have remained static unlike in some areas in the region where falls of more than 10% have been recorded – especially when land fell outside areas of demand from neighbours.

In the north east more land has come to the market recently mainly offered by private treaty, and the better quality holdings are still selling to neighbours or purchasers with additional funds.

The former benchmark figure of £3000/acre for bare land in the east midlands is now more of an exception than the rule with some sales dropping below £2000/acre where the land is of no special interest.

Strong evidence of a two-tier market are reported from the west midlands where the expected fall in values for the moderate quality farms and land is beginning to show in private treaty deals.

"Best quality units sell well at auction but the more moderate quality lots are only finding buyers at reduced prices," it said.

Also the drop in milk price and poor outlook for the dairy sector has reduced the number of dairy units offered for sale by auction with several failing to make their reserves in Staffordshire.

In the eastern counties fully equipped average holdings sold with vacant possession are still worth over £3000/acre but few have been brought to the market. Around Chelmsford and Cambridge the residential element of a unit is maintaining values against the backdrop of falling farm incomes.

However, the average price of bare land in the east now stands at £2850/acre with reports from Norwich and Colchester showing a 6-7% fall in bare land values in the past six months.

Over the southern regions demand for units with good residential angles continue to prop up the market. Less attractive units are holding up better than anticipated due to realistic pricing and the shortage of supply.

Static best describes the market in Wales although in the south west an influx of buyers from England is helping to maintain capital values. Blocks of accommodation land sell well but not at the levels seen two years ago.

A shortage of supply in Scotland and plenty of buyers often with rollover funds has helped offset the downward pressure on prices.

In Ayrshire dairy farm prices continue to fall back from a 1997 peak but livestock units are holding firm. Good well equipped units in Dumfries & Galloway are selling well but prices have fallen slightly.

Value of agricultural land with vacant possession as at Oct 1, 1998

Type of farm

Region Arable Dairy Mixed Hill

North-east 3400 — 3000 725

North-west 3200 3969 3100 994

Yorks & Humberside 3442 3000 2692 1475

East midlands 3236 3500 2900 —

West midlands 3483 3513 3236 1700

Eastern 3317 — 3333 —

South-east 2838 — 3306 —

South- west 3000 3271 2783 1300

Wales — 2986 2257 1125

Scotland 2461 2250 1565 156

Northern Ireland 3925 5083 3300 1592

Source: Valuation Office