9 August 2002

Values falter in spring after strong gains

By Andrew Shirley

FARM values fell significantly during the second quarter of 2002 after six months of strong gains, according to the latest figures from the Royal Institution of Chartered Surveyors.

The organisations rural land market survey for April to June shows the average price of non-residential farms slid from £3200/acre to £2870/acre. This means land is now worth 11% less than for the same period last year, but over the longer term is still similar to the levels seen at the beginning of 1997.

Bare land also slipped from £2462/acre to £2407/acre.

A spokeswoman for the RICS rural faculty said the slump coincided with the first increase in farmland availability for nearly two years. "Restrictions on animal movement and the dogged determination of farmers to stay in business during foot-and-mouth led to a sharp rise in prices in 2001, with buyers competing for a shrinking supply of farms on the market.

"Initially compensation made many farmers cash-rich, enabling them to hold on after F&M to see if livestock prices improved. It has become clear that wont happen. The dairy industry is also floundering and cereal prices are now at the same level as 1976. Increasing modulation and the CAP mid-term review do nothing to relieve the problem."

But RICS researcher Ryan Emmett said one quarter of falling prices was not necessarily indicative of a potential crash, although he admitted values might come down further. "They could go as low as £2500/acre, but with so many influences it is difficult to determine the underlying value of land."

National land agent Strutt & Parkers arable land index for the same quarter remained static at £2482/acre, but confirmed the large increase in land availability. Over 30,000 acres of land is reported to have entered the market in June – the highest monthly figure for over four years. "Purchasers having this amount of choice is likely to lead to pressure on values in certain sectors of the market," said the firms Michael Fiddes.

In Lincs, Brown & Co agent James OBrien said there was still strong demand for the best land but lower quality arable land with less flexibility is becoming more difficult to sell. The firm recently auctioned 51.5 acres of double cropping silt near Wainfleet for £9708/acre, the purchaser being a farmer/produce merchant.

At the same sale, 20 acres of Grade 2 soil made £1831/acre and two further lots were withdrawn at just under £2000/acre. &#42