31 July 1998

Farm gloom knocks price

By Louise Rose

FARMERS and non-farmer buyers now are ac ting in different markets as the worsening agricultural climate affects the demand for many commercial farms offered for sale but interest in residential units strengthens.

During the second quarter of 1998 about 4757 acres of arable farm type changed hands averaging £3410/acre, and 2207 acres classed residential averaged £8267/acre, according to the latest Royal Institution of Chartered Surveyors Farmland Price Survey.

"The continuing poor prospects of agriculture have affected almost all commercial farms, and prices are likely to have fallen by 20% by the end of this year for bare land with no amenity value," says Richard Brooks, Lane Fox. "Higher residential prices have countered this effect for sporting estates and residential farms in popular locations".

Also, the weighted average farmland price for sales in England and Wales during the quarter ending June 30, 1998, continued to reflect the recent plateauing of values at £3047/acre – a 4% rise on the same period in 1997 and just over 0.5% higher than the average value for the first quarter of 1998.

However, forecasts for the next six months from the responses to the survey of chartered surveyor agents views predict a decline in value of all farm types except residential units, although far fewer agents -15%- now expect residential farm prices to increase – for the quarter ending March 31 the figure was about 40%.

"As these predictions work into the system the headline average will be brought down," says the survey.

Also, the investment market is showing signs of weakening maintains Roger Pryor, Strutt & Parker. "As existing rental levels perhaps come under pressure, yields could move out to 5%," he said.

During the second quarter only 2839 acres of investment land was traded compared with 7626 acres for the same period last year with prices averaging £2179/acre and £2597/acre respectively said the survey.

For the first time the survey was extended to include sales in Scotland where market forces similar to those in England and Wales influenced the market.

"Commercial farms are often proving difficult to sell and purchasers are increasingly reluctant to buy in the hope of price falls," it said.

Vacant possession sales for second quarter 1998

Region area sold average price/acre

South east 1574 3753

West mids 1609 3534

South west 5528 2925

East mids 524 2748

Wales 1092 2244

Note: Where 5 or more sales were recorded

Vacant possession sales

Breakdown by farm type of all sales for quarter ending June 30

Farm type Area Ave price Reported

sold an acre sales

Residential 2,207 8,267 34

Arable 4,757 3,410 28

Mixed 1,942 3,021 14

Dairy 1,102 2,714 12

Beef/sheep 3,551 2,571 53

Other 299 1,318 8