Charlie Bryant, of Brown & Co, outlines what the key features of the East Midlands land market were in 2014 and speculates what 2015 could bring.
2014 market – key features
The land market has continued to gather pace throughout the year, and commercial farms without a significant residential element remain the most popular offering.
Buyers with funds obtained from outside the industry have dominated the market, although farmers have shown remarkable resilience in competing with them. However, there is no doubt that some farmers either left the market or tempered their bids as a result of falling commodity prices and expensive blackgrass control.
The level of publicly marketed land was similar to 2013, but there was a significant amount of off-market activity. The region has a very diverse range of soils and there is a widening gap between better and poorer quality soils in terms of marketability and value.
2015 outlook – main market influences
- Investment strategy/attitude of non-farmer buyers
- Alternative investment opportunities in comparison with farmland
- Interest rates
- Farm rents/economics
2015 outlook – what will happen to land values?
This depends on the attitude of non-farming buyers, as money derived solely from farming can no longer plausibly drive values any higher.
Fiscal benefits and return on capital will be important to investors, and the downturn in farm incomes is readily apparent. Farm rents are overinflated, which will cause investors to base future budgets on a more conservative rent.
Land values are therefore likely to stagnate in 2015 or increase only marginally.
How much land will come on to the market in 2015?
If the predicted shortfalls in cash come to fruition, I can see a number of owners selling relatively small amounts of land; perhaps an off-lying field that will have no material effect on the business.
One or two frustrated farmers may seek to relocate altogether, either to expand in another geographic area or to try a different line of business.
Easiest farm or land to sell in 2015
Commercial arable farms (more than 500 acres) are by far the most popular type of farm at present, and they command significant premiums, whether in the Wolds or the Fens.
The most difficult farm to sell in 2015
Anything with a significant residential element becomes more difficult to sell the further one ventures from the more populated conurbations of the Midlands.