14 May 1999

Land value dip slows down and trend buoyant

By Louise Rose

THE pace of decline in land values is slowing across all farm types and in the arable sector there is evidence of improving prices due to firmer commodity prices and a good potato harvest.

"Further price falls are expected to be more gradual than predicted last year. Agricultural output has remained almost static over the past two years and farmland prices have been relatively resilient," says the most recent Royal Institution of Chartered Surveyors Farmland Price Survey covering land sales during the first quarter of 1999.

For the three months ending Mar 31 the weighted average price for farmland fell back to £2642/acre a 17% drop from the market peak in the third quarter of 1997.

However, the survey maintains that demand for farms with residential appeal, supported by non-farmer interest, continues to strengthen as improved consumer confidence has led to a recovery in the housing market.

"Non-farmer buyers continue to be an important element of the market place," says Jim Bryant, Bidwells.

Chartered surveyors commenting on recent market trends maintain that prices in the south east and parts of East Anglia have suffered less than in other areas. Demand has been particularly firm in these two regions, in contrast to steep declines in other areas.

"Transactions covered by the survey suggest that the total value of sales in these regions was greater than across the rest of England where volumes were very weak," found the survey.

Many surveyors believe the market currently is propped up by the lack of property available with many farmers attempting to "ride out the storm". With little improvement anticipated in the short term some increase in farmland availability is expected over the next 12 months. An increase in supply could have a severe effect on land values if demand continues to wane.

"There remains a core of demand for quality arable land or complete farm units. Many farmer buyers are expecting prices to fall but remain unwilling to sell. Marginal land or where there is no neighbouring interest, is becoming hard to sell," said Simon Dixon Smith, FPDSavills.

Regional differences

Also the survey produced significant regional variations. Demand was weakest in the Midlands, Yorkshire, Humberside and the North and these areas were worst hit by falling prices.

Addressing performance in the sectors of the farmland market, the survey found that properties in the beef/sheep were worst hit by falling land values followed by dairy units. According to many surveyors this decline in values is likely to bring significantly more farmland in these categories onto the market during the next year.