27 February 1998

Quality land is the better bet

INVESTORS keen to buy farmland for tax reasons should not ignore land quality or they could end up spending more than they save.

Heavy land offers more consistent yields, and could be worth more in the long run, says Knight Franks Michael Lamyman.

With the benefits of re-investment and rollover relief under review, buyers are rushing to buy land ahead of next months Budget. But they may not be giving land quality enough thought.

Those looking for farms which are easy to manage opt for cereals and other combine crops, says Mr Lamyman.

"Strong land has not always found favour with farmers because in most cases it proves more difficult to work. But with improvements in modern machinery, a seed-bed can be prepared more quickly."

With wheat prices of £80/t, good yields are needed to cover variable costs of up to £270/ha (£110/acre) and fixed costs of up to £520/ha (£210/acre). Subsidy payments are under review so arable profit margins are set to remain tight, he adds.

"Buying heavier land could make the difference between profit and loss. Even a 40% saving in tax is not worth much in the face of a loss-making investment."

Land values could soon reflect the better yield potential of heavy soils if profits continue to shrink, says Mr Lamyman. &#42