The market for tenanted farms is still strong despite political uncertainty, but there is growing disparity between the top and bottom of the market.
As Farmers Weekly reported last week, a number of large landowners are disposing of let holdings to release funds to invest in other assets. By contrast, enthusiasm from buyers does not appear to be waning.
So is it a good or a bad time to buy a let farm?
Will Parry, a partner at Strutt & Parker, says it depends on what buyers are looking for.
“Anything that has issues is struggling to sell or buyers want a big discount.” Land that needs draining and buildings that need work are two common issues that put investors off, Mr Parry said.
“If you can find something that isn’t compromised, bidding will be strong,” he said. “If it doesn’t have an edge bidders will give it a miss.”
Shropshire firm Berrys agrees that potential investment purchasers have become much more selective, taking into account other factors besides capital growth.
Notably, the firm says, buyers are taking into account the potential productivity of the land and areas with strong land rents.
Think for the longer term
Fisher German partner Matthew Barker said returns from let farms are traditionally low, so buyers need to be committed in the long term.
Pension funds and house builders typically take a long-term view, Mr Barker said, but farmers will also compete.
A farm purchase qualifies for an inheritance tax exemption provided the buyer farms it in hand for more than two years or runs it as a let property for more than seven.
Capital gains tax benefits are also available for those with rollover funds.
And neighbouring farmers may take a once-in-a-lifetime opportunity to buy a farm, whether it’s let or not, perhaps with one eye on the next generation.
“They may be able to take control of the farm in the future, so are not worried about it being let now,” Mr Barker said. “Those with cash in hand and time on their side will be very active.”
Uncertainty adds weight to decision
A number of tenants are being offered the chance to buy their farm, says James Murphy, managing director of H&H Land and Property, who has also seen evidence of large landowners shedding farmland assets.
“It’s comparatively cheap to borrow money at the moment and that may not be the case for too much longer. It’s a big decision for tenants in what are uncertain times because it is a lot of debt for a business to take on.”
Let farms and land – what’s for sale?
Mixed farm in Cumbria
Town Head Farm at Nethertown in Cumbria is subject to an AHA tenancy which began in 1990.
The 134-acre mixed arable and stock farm has traditional buildings and a four-bedroom farmhouse at a guide price of £750,000 with H&H Land and Property.
Grade 3 land in Nothamptonshire
About 95 acres of Grade 3 Northamptonshire clay, let on a first succession AHA tenancy, is for sale through Strutt & Parker for £650,000.
The ring-fenced block at Maidwell near Market Harborough currently rents at £5,715/year.
Large Leicestershire estate
Large-scale sales include the 1,730-acre Shackerstone Estate in Leicestershire, which has approximately 1,600 acres of AHA and FBT land, development opportunities and 10 residential properties.
Agricultural, residential and commercial income earns the estate in the region of £250,000/year and it launches this month with Carter Jonas at a guide price of £13m.
1,000 acres in Lincolnshire
Savills has 987 acres in the shape of Bishops & Trader Farm and Wydale Farm near Boston, Lincolnshire, selling separately or together for £6.35m and offering a rental income of £87,000/year.
£10m price tag for Shropshire estate
At £10m, Savills is also selling the let 1,278-acre Bridge and Brockton Estate between Newport and Telford in Shropshire.
Former council farms
About 600 let acres across 10 farms are available with Fisher German as part of the Herefordshire Council Smallholdings Estate.
Deals being done
Agents have provided evidence of deals being done on farmland investment opportunities across England and Wales.
Roger Parry and Partners has recently agreed a sale on 105-acre Bryn Celyn Farm, near Mold, Flintshire.
Comprising flat and undulating grassland, the AHA stock farm is equipped with cattle and sheep sheds plus a silage clamp and house.
Fisher German says six potential buyers have bid in excess of the £900,000 guide price for 118-acre Hall Farm, seven miles from Nottingham.
It is currently let on an FBT until 2030 with no landlord break clause until August 2030 with a £10,500 annual rent.