17 July 1998

Best arable acre price now dips below £3000

By Louise Rose

THE benchmark figure for good quality arable land is now below the recent average of £3000/acre reflecting an 8.7% decline in value since the end of 1997.

Farmers in the east Midlands are choosing to purchase the better quality arable land paying an average price of £2766/acre compared with £3030/acre last year, says the FPDSavills farmland value survey.

"The average value of British farmland sold with vacant possession fell by 2.3% during the second quarter of 1998 following a 3.3% drop in the first quarter – an 8% reduction since mid-1997," says the survey.

Also worst hit was the medium and lower quality commercial farmland. In the east Midlands the average value of medium quality arable land fell from a £2777/acre high in December 1996 to now £2278/acre – an 18% decline in the 18 month period.

Nationwide purchasers looked to invest in the best quality land. The national average value of prime arable land now stands at just below £2700/acre, down 6.6% from the June 1997 high.

"It is holding its value much better than land of average and poor quality which have fallen by 8.9% and 10.6% respectively during the same period," the survey says.

However, values in the south and south west remain firm due to the strong demand for residential farms and estates leading to a closing in the gap between arable land values in the east Midlands and the south.

The average value of medium quality arable land in the south of England has fallen by just 7.2% from £2359/acre in June 1997 to £2189/acre in June 1998.

"We maintain that values will fall by 15% during the calendar year, but falls in land values should be cushioned by a weakening pound and a fall in interest rates as we move into 1999 although there is a risk that sterling could stay at current levels for some time," says Michael Bullen FPDSavills research.

There is also currently more land available either on the open market or privately this year – 50,000 acres in holdings of at least 200 acres – compared with the same time last year according to research from Strutt & Parker.

"As at 1 July about 44,750 acres of vacant possession land were available – a 70% rise on the corresponding period last year when 26,800 acres were on the market," says the research.

However this figure reflects the much smaller proportion of investment land on the market this year – 5000 acres unlike the 13,000 acres at the same time last year and the longer sale times.

"Deals are taking longer to wrap up with many potential purchasers offering on a property rather than snapping it up," says Brian Dixon, Strutt & Parker. "For example when Manor Farm, Teffont, was marketed last year the deal was quickly negotiated, but this time it is taking longer to sell."

Buyers are not often meeting the vendors price levels, he maintains, unless the property is of the highest quality and in a popular location with a high proportion of properties sold categorised as residential holdings of between 200 and 300 acres.

"There is a continuing shortage of good residential farms in the south east despite strong demand and prospects for the second half of 1998 will depend on the type of property offered onto the market," he adds.