2 January 1998

Scant supply keeps 97 prices well on the boil

FROM a low point in the year ending September 1993 when vacant possession land values averaged about £1400/acre, values increased to average £3170/acre during the third quarter of 1997.

However the latest figures mask a wide range of values with quality arable land achieving over £4000/acre and well equipped dairy units more than £6500/acre inclusive of milk quota.

The key features of the 1997 farmland market include:

lInsufficient land on the market to meet demand.

lIncreasing recognition through the year that farm incomes would be substantially lower mainly due to the combined impact of revaluations of the green £ and the strength of sterling on export markets and other issues including the continued problems in the beef sector.

lRelatively low and stable interest rates.

lCompetition from non-agricultural buyers often securing high value residential and amenity properties.

lFiscal influences including capital gains tax, rollover relief and (since November 1994) reinvestment relief and inheritance tax agricultural property relief.

By the end of 1997 strong evidence of distinctly separate markets existed with firm demand for properties with residential appeal often underpinned by capital tax driven demand and a wider range of commercial farm values reflecting the variable quality of land, buildings and dwellings.

Also the land market is traditionally slow to respond to both actual and perceived negative factors. More than a year elapsed from the announcement of the 1992 CAP reform to increased land values from mid 1993.

From late 1993 demand for land has been fuelled by increased farm incomes reflecting high product prices and IACS payments. From mid-1997 the industry now faces the reverse situation. The land market will respond but only over a period of months. So what factors will influence land values in 1998?

lFor farmers there has to be concern over the sharp decline in farm incomes – this must depress both demand for and the supply of land on the market.

lTax-driven demand for quality estates and farms purchased for amenity, sporting or residential appeal will be directly influenced by any changes to fiscal policy (spring budget 1998?).

lAs land values fall, there may well be a reduced supply of land on the market for sale – after all, why should anyone willingly sell land on a falling market?

Many commentators are predicting a decline in values of between 10-20% in the next 12-18 months – actual prices realised will reflect local supply and demand factors. Does a vendor merely want to sell or have to sell? Who are the potential purchasers? A sound knowledge of the local market will therefore be crucial for buyers and sellers alike.

David Hudson,

chief

agricultural manager,

Agricultural Mortgage Corporation

FROM a low point in the year ending September 1993 when vacant possession land values averaged about £1400/acre, values increased to average £3170/acre during the third quarter of 1997.

However the latest figures mask a wide range of values with quality arable land achieving over £4000/acre and well equipped dairy units more than £6500/acre inclusive of milk quota.

The key features of the 1997 farmland market include:

lInsufficient land on the market to meet demand.

lIncreasing recognition through the year that farm incomes would be substantially lower mainly due to the combined impact of revaluations of the green £ and the strength of sterling on export markets and other issues including the continued problems in the beef sector.

lRelatively low and stable interest rates.

lCompetition from non-agricultural buyers often securing high value residential and amenity properties.

lFiscal influences including capital gains tax, rollover relief and (since November 1994) reinvestment relief and inheritance tax agricultural property relief.

By the end of 1997 strong evidence of distinctly separate markets existed with firm demand for properties with residential appeal often underpinned by capital tax driven demand and a wider range of commercial farm values reflecting the variable quality of land, buildings and dwellings.

Also the land market is traditionally slow to respond to both actual and perceived negative factors. More than a year elapsed from the announcement of the 1992 CAP reform to increased land values from mid 1993.

From late 1993 demand for land has been fuelled by increased farm incomes reflecting high product prices and IACS payments. From mid-1997 the industry now faces the reverse situation. The land market will respond but only over a period of months. So what factors will influence land values in 1998?

lFor farmers there has to be concern over the sharp decline in farm incomes – this must depress both demand for and the supply of land on the market.

lTax-driven demand for quality estates and farms purchased for amenity, sporting or residential appeal will be directly influenced by any changes to fiscal policy (spring budget 1998?).

lAs land values fall, there may well be a reduced supply of land on the market for sale – after all, why should anyone willingly sell land on a falling market?

Many commentators are predicting a decline in values of between 10-20% in the next 12-18 months – actual prices realised will reflect local supply and demand factors. Does a vendor merely want to sell or have to sell? Who are the potential purchasers? A sound knowledge of the local market will therefore be crucial for buyers and sellers alike.

David Hudson,

chief

agricultural manager,

Agricultural Mortgage Corporation

Scant supply keeps 97 prices well on the boil

FROM a low point in the year ending September 1993 when vacant possession land values averaged about £1400/acre, values increased to average £3170/acre during the third quarter of 1997.

However the latest figures mask a wide range of values with quality arable land achieving over £4000/acre and well equipped dairy units more than £6500/acre inclusive of milk quota.

The key features of the 1997 farmland market include:

lInsufficient land on the market to meet demand.

lIncreasing recognition through the year that farm incomes would be substantially lower mainly due to the combined impact of revaluations of the green £ and the strength of sterling on export markets and other issues including the continued problems in the beef sector.

lRelatively low and stable interest rates.

lCompetition from non-agricultural buyers often securing high value residential and amenity properties.

lFiscal influences including capital gains tax, rollover relief and (since November 1994) reinvestment relief and inheritance tax agricultural property relief.

By the end of 1997 strong evidence of distinctly separate markets existed with firm demand for properties with residential appeal often underpinned by capital tax driven demand and a wider range of commercial farm values reflecting the variable quality of land, buildings and dwellings.

Also the land market is traditionally slow to respond to both actual and perceived negative factors. More than a year elapsed from the announcement of the 1992 CAP reform to increased land values from mid 1993.

From late 1993 demand for land has been fuelled by increased farm incomes reflecting high product prices and IACS payments. From mid-1997 the industry now faces the reverse situation. The land market will respond but only over a period of months. So what factors will influence land values in 1998?

lFor farmers there has to be concern over the sharp decline in farm incomes – this must depress both demand for and the supply of land on the market.

lTax-driven demand for quality estates and farms purchased for amenity, sporting or residential appeal will be directly influenced by any changes to fiscal policy (spring budget 1998?).

lAs land values fall, there may well be a reduced supply of land on the market for sale – after all, why should anyone willingly sell land on a falling market?

Many commentators are predicting a decline in values of between 10-20% in the next 12-18 months – actual prices realised will reflect local supply and demand factors. Does a vendor merely want to sell or have to sell? Who are the potential purchasers? A sound knowledge of the local market will therefore be crucial for buyers and sellers alike.

David Hudson,

chief

agricultural manager,

Agricultural Mortgage Corporation