7 June 1996

on values?

Environmental effect

By Catherine Paice

WITHOUT sufficient sales to draw firm conclusions, the effect of environmental designations – whether or not they are compensated – on farm values focus almost entirely on the attitude of the buyer.

Reaction will be based on how far purchasers believe they might be restricted in their freedom to farm, and on any perceived negative effects of public access onto the farm, where schemes require or encourage it.

Recently, a strong land market has clearly offset their potential effect, which depends heavily on the lands location and the type of farming common to the area. Very few buyers will have been put off by most designations, and there has been very little evidence to show that land prices are being specifically influenced by them. Agents views on the potential disruption, however, vary according to where the land lies.

Demand for land has been so strong that there has been no downward effect on arable land values, according to Leo Hickish of Strutt & Parker. On poorer soil or grassland, there might even be a minor increase in prices paid, he said, particularly if the market took a turn for the worse. "If you knew you could get, for example, CSS payments over a specific timescale, and farming subsidies were falling, you would be bound to take some comfort from them," he said.

Robert Hindle of J &#42 Walter, Lincoln, claims NSAs have proved to be beneficial, particularly as set-aside can now be incorporated. The most disruptive designation in the eastern counties, according to Mr Hindle, is an Ancient Monument. "The powers of English Heritage to censor and fine farmers are enormous," he said.

"I would be horrified if someone slapped an NSA on me," said Charles Dudgeon of Savills, Edinburgh, "because its usually on good alluvial soil by a river. ESAs certainly dont detract from land values in Scotland. SSSIs could go either way because the income doesnt always fully compensate, although on the whole it ought to stop values from falling."

From the Yorkshire Dales, Nigel Foster of George F White, Bedale, said: "I think generally the money is paid to farmers to farm in a way that is helpful to the environment but it doesnt stop them from doing what they probably would have done anyway, and they get £40/acre plus for doing it. What it does do is stop them from looking to increase production on that land."

Many dairy farmers on land which is closer to the Pennines do not choose to enter the ESA scheme there, so the designation has little practical effect. Further east, where beef and sheep predominate, a stock farmer with land within an ESA will now receive at least £38/acre more than he would on land outside it.

Last valuation

The last valuation he did on such land was four years ago in Swaledale, at Park Hall Farm, near Reeth, North Yorkshire. Then, he said, "Having suffered two lean years, I feel that the payments received under the LFA and the ESA schemes are of paramount importance to the survival of farmers in the Dales." Mr Foster suggests that on two parcels of similar pasture land, the extra £400/acre which was paid for the ESA land was not coincidental.

Last year, claims Mr Foster, an SSSI designation helped boost the price paid at auction for Chapple Farm, Whaw, near Reeth, all of which lies in an ESA. However, one lot, designated as an SSSI sold for £2465/acre while another parcel of similar quality, size, and even on the same road, but not an SSSI, sold for £3069/acre. In Mr Fosters view, the SSSI was partly responsible.

"Rightly or wrongly, I believe that prospective purchasers were put off by the SSSI designation, which resulted in a lower price."

Compliance with an SSSI agreement is obligatory, he pointed out. It expunges the use of compound fertilisers and slashes the use of muck. "Here, you might get £50-75/acre in compensation but it is perceived to be more restrictive."

In the south west, small blocks of land within ESAs have attracted well over £4000/acre. But David Hebditch of Humberts Taunton office is among those who believe that any restriction to farming practice depletes the potential earning power of the land.

Townsend Chartered Surveyors, Exeter, sold 17 acres in March which had been entered into Tier 1 in the Dartmoor National Park. "It was a bit of a blow to the buyers, because initially it was not clear that the land was subject to an agreement," said the firms Mark Dyson.

"The ability to "agree to breach" after five years helps soften any adverse reaction. "In the end we dont consider it affected the price."

Robin Thomas of Strutt & Parker, Exeter, believes ESA payments, especially on Exmoor, have helped sales. "When you havent got much flexibility in stocking or cropping, it can be a bonus to have some compensation," he said. "And long term these sort of grants are more likely to remain than, for example, arable area payments."

Adjoining farm

The sale of adjoining Withiel and Higher Ford Farms on Exmoor last year is a case in hand. Their combined income from a National Park conservation management agreement on 254-acre Higher Ford in the National Park, and ESA payments on 422-acre Withiel, totalled £8,100.

In East Sussex, Charles Clark of Heathfield was looking to buy part of an estate on the South Downs. "My client was looking for land from which he could get an income, and the fact that it lay in an ESA definitely had a tremendous effect on its value." Although unable to quantify it, Mr Clark believes the ESA income could add at least £100/acre to downland values, put last summer at around £1500/acre for arable and £1100/acre for pasture.

Land prices in East Sussex had not risen to the extent as elsewhere, he said, due to a relative dearth of farmer-based interest. The mainly residential interest had therefore also diluted any effect that SSSIs might have had on purchasers.

Also on the South Downs, 548-acre Erringham Farm is being marketed north of Shoreham for the second time in three years. Since its last sale, it has been entered by its non-farming owners into an ESA agreement and put down to grass. Strutt & Parkers Mark McAndrew points out that it had been a productive farm, despite being on thin soils over chalk, with cereal yields around 2.5t/acre boosted by malting barley crops.

"If you take the annual ESA payment, plus the rent for letting all the grazing – although that is probably discounted a bit to take into account the stocking restrictions – I reckon the amount you can generate (currently around £70,000 a year) is more than you would achieve arable farming it," he said.

The income provides a return of over 6% on capital. "Its almost like having a let farm," said Mr McAndrew.


&#8226 CSS – Countryside Stewardship Scheme

&#8226 ESA – Environmentally Sensitive Area

&#8226 NSA – Nitrate Sensitive Area

&#8226 NVZ – Nitrate Vulnerable Zone

&#8226 SSSI – Site of Special Scientific Interest


WHAT THEY STAND FOR


Impact of total CSSpayments on incomes and capital values (average net values in £s)

Type ofTotal income pa/?Capitalised total% increase in capital

grazing landacre holdingincome/acre holdingvalue of holding

Good 14514

Average20898

Poor11536

Source: CELTS. All figures rounded up to nearest £.

An SSSI designation helped boost the sale price of Chapple Farm, Whaw, near Reeth, North Yorkshire, all of which lies in an ESA.