National uncertainties filtering down to prices
By Andrew Shirley
LAND prices have been hit by a slowdown in the housing market and mounting uncertainty over the economy, according to the Royal Institution of Chartered Surveyors latest quarterly survey.
During the third quarter of 2001 the average weighted value of vacant possession farmland fell by 3.1% to £3106/acre, although this is still 8% higher than for the corresponding period last year (see graph).
Residential buyers, a key element in buoying up prices, appear more cautious, and agents expectations for this sector of the market over the coming year are the weakest in the surveys history – a net balance of respondents are predicting that demand will lessen in 2002.
Although an excess of demand over supply has also been helping to sustain values, despite the slump in agricultural incomes, RICS economist Ryan Emmett reckons this balance could be on the verge of changing.
"The wider economic environment is likely to weaken and this will effect demand. There are also signs that supply is increasing and I think we can only expect more downward pressure on prices, this could be the start of a turning point in the market."
Foot-and-mouth restrictions also added to the paucity of farms on the market with many planned sales put on hold. The analyst says this situation is now likely to be reversed over the next few quarters.
But, he isnt forecasting a glut of sales and subsequent price crash. "Farmers are very reluctant to give up their farms and will hang on until the last minute, but prices will probably start to come back to pre-F&M levels as more farms come up for sale."
This has already happened with bare land values – the average price is now £2385/acre, marginally below the figure of £2416/acre recorded for the third quarter of 2000.
Mr Emmett says bare land values are more indicative of the state of the farming and reckons falling world commodity prices will further squeeze incomes and could force increased rationalisation of the industry. *