Farmers in South East face stiff competition when buying land

Farmers in the south east of England are increasingly having to compete with wealthy individuals for farmland.

These include investors and Londoners looking for a country pad, as well as other farmers with rollover money from development land, who agents say have become significant players in the farmland market.

However, this may change somewhat if commodity prices remain low and as cash-flow starts to dry up more forced sales could happen towards the end of the year and into 2017, warn agents.

In this week’s regional land focus, statistics from Savills show that 2015 was a busy year in the South East, with nearly 18,000 acres publicly advertised for sale.

Land market values: south-east England

Source: Savills

Richard Thomas, BTF Partnership, Ashford

• In Kent and East and West Sussex we found that demand continued to outstrip supply last year. Kent probably has more quality Grade 1 and Grade 2 offerings, especially with fruit-growing potential, so we would say values were higher.
• We have a reasonable pipeline of farms coming to the market but no significant-size holdings at the moment. Instructions include bare land parcels and smaller residential farms but by the end of the year, if commodity prices remain where they are, that could well change.
• Farmers with rollover funds from development sales are now a major force in the marketplace. City investors appear to be less interested now there is a perception that the market may have peaked.
• Debt is not a major driver of sales but death and divorce are. Purchasers remain driven by inheritance tax advantages, low base rates and rollover relief.   
• Large parcels of quality arable land have continued to be in most demand with poorly accessed Grade 3 permanent pasture or land which may not pass environmental impact assessment screening most difficult to shift.

George Syrett, Savills, Winchester

• Arable farmers are having a tough time. If wheat and oilseed rape prices continue we may see some sales in 2017 as cashflow for some farmers becomes a problem.
• However, there was significant interest in large commercial arable farms in the first half of 2015 with some frustrated buyers missing out.
• We can already see the effect of commodity prices on some smaller farms and we expect to see a few farms brought to the market as a result of financial difficulties. Although the farmland market has cooled in other parts of the country, Hampshire land values have remained firm.
• The main influences on commercial farmland has been the treatment of rollover relief from capital gains tax. It will be interesting to see how poor commodity prices affect prices paid. Those estates with amenity and commercial farming are likely to retain their value as the country estate market continues to recover.
• The market on the Isle of Wight seems to be struggling, as are amenity farms blighted by roads and rail.

Matt Sudlow, Strutt & Parker, London

• Arable values increased by 9.5% between 2014 and 2015. The average value last year was £11,271/acre, while pasture was £8,120/acre.
• When comparing 250 to 500-acre holdings with larger commercial size blocks in excess of 500 acres, our data supports the theory that investor buyers looking for scale are paying more than the farmer buyers.
• It is anticipated that prices may ease slightly in 2016 but we are not expecting a sudden decrease. Undoubtedly it shall come down to quality and location.
• Towards the end of last year we saw an increase in the number of residential farm buyers entering the market, often either from London or people moving back from abroad. Farmers remain active if land becomes available on their doorstep, but given the current climate, are not looking to expand aggressively.
• We are yet to see a real knock-on effect of the low commodity prices. Depending on how long the low prices last for, and the potential changes to subsidies with the European referendum on the horizon, this could well change.