Landowners happy to sit tight

IN THE midlands, data from FPDSavills suggest that only Northants, Staffs and Leics saw an increase in the volume of publicly marketed farmland over 2003 (see graph).

Northants more than doubled its sales to 6800 acres, by far the largest acreage of any county except Lincs and Devon. But this was driven mainly by an abnormal number of large estates (see box), rather than any surge in commercial soil. Despite the increase, Leics still only offered just over 1000 acres and Staffs less than 2000 acres

Two of the largest offerings in the region were dairy farms. In Shropshire, FPDSavills’ Tony Morris Eyton handled the sale of the 950-acre Watson Jones farming company that sold for “well in excess” of its 5m guide to a local farmer/businessman.

Exceptionally High

“The mechanics of a market faced with a dearth of large, commercial and residential farmland meant demand was exceptionally high,” he said.

The unit included two substantial farmhouses, several tenanted cottages, a modern dairy unit, good land, sizeable irrigation pools and a private family shoot.

“There remains very keen interest in the residential aspect of buying a farm to protect one’s environment and that is likely to continue,” Mr Morris Eyton added. Fellow FPDSavills agent Ken Jones spent most of the year trying to wrap up a deal on the Co-op’s 765-acre dairy unit at Frisby in Leics since its launch in the spring. He said he was hopeful of completing by the end of the year and achieving close to the 3m guide. This won’t include any transfer of historic entitlement to the single farm payment, he added.

The buyer is a local farmer, but it seems unlikely the farm will stay in milk. “All the silage on the farm has been sold,” said Mr Jones.

Investment potential

Some buyers have based their purchases on investment potential, said Staffs agent John Hinson of Hinson & Parry. “And buyers have been prepared to accept relatively low returns in some cases demonstrating how attractive owning a slice of rural England remains.”

In May this year, the company acted on a 268-acre tenanted dairy holding at Roden, Shropshire, via private treaty that offered a modest, but respectable 2.25% return on capital.

“The share market has lost it appeal and some investors will be hoping for capital growth if the land becomes free of a tenant in future,” he said.

Parcels of bare land have also created a buzz. “A 45-acre block at Haughton, near Stafford, made 6209/acre with consent for a four-bed house and buildings subject to an agricultural occupancy restriction.”

In some cases, buyers didn’t want the land at all, he explains. “We’ve handled some Grade 3a land – prone to flooding – on a canal where six lots were taken largely by buyers hoping to secure mooring rights at 3570/acre.”

According to Chris Jones, of Berrys, producers have invested up to 4000/acre in bare land when significant blocks have become available. “It is often above expectation, but how often will the chance arise?”

Some businesses are financing expansion from the sale of assets such as barns for conversion. “As with other areas of the midlands, demand is exceptional. Once client has financed the relocation from the release of a 2.4-acre farmstead with residential potential.”

Dividing up individual farm businesses has yielded the greatest return for some vendors. Shrewsbury-based Halls split the estate of the late Walter Dowell into 15 lots at Belbroughton, Stourbridge, to achieve a top price of 22,277/acre.

“Despite the attractive features of the estate, not even I expected competition to be so keen,” said the company’s Roger Sadler.

The mood typifies the intensity of competition down and along a swathe of land running along the Welsh border. Division over structure of future farm supports on opposing sides of the border may exist, but producers are united in the fight for additional acres.

Halls handled five blocks of fertile land at Bucknell, Shropshire, covering 36.1 acres that made in excess of 205,000 at auction last month with bids topping out at 8333/acre.

Despite the prices achieved, Halls managing director Peter Willcock reckoned many producers were waiting to crystallise the actual level of farm income from the SFP before making investment decisions.

Submitting claims

“We expect to see an increase in farmland offered in the spring ahead of the deadline for submitting claims on May 15 next year,” he said.

Grazing land in Derbys – and some of it relatively poor – has still commanded good values, said Ashbourne-based Nick Hansen of Bagshaws. “Prices of over 4000/acre have not been uncommon. We have not seen one complete farm on our books from this office, but parcels of bare land have been snapped up readily.

“For example, at Fairfield, near Buxton, 34 acres made 4256/acre for grazing land clearly grade 3 or 4. And at Flagg, 73 acres in three lots returned 4383/acre.

“A principal difference this year has been producers” actions. Whereas dispersing stock – usually small dairy herds – saw vendors move off holdings, many are now sitting tight.

“That can partly be accounted for by the rise in residential property prices that have limited options as to where to move,” he said.

Further east, the market has been also short of both bare land and farms, said William Naylor of Strutt & Parker’s Market Harborough office. “I often think this area is the litmus paper for what happens elsewhere.

“So few farms and a lack of land have compounded demand throughout 2004. Right down to individual assets – barns for conversion remain a gold mine – the market has been hotly contested.”

That could be the case for 2005, suggested Mr Naylor. “A General Election in May will stagnate the market short-term and producers may sit tight to see what the mid-term review brings in reality. Don’t expect any sudden rush is my feeling on the matter,” he said.

Henry Sale, joint managing partner at Fisher German, reckoned the short supply of land had increased values by 15% in the east midlands area over the past year. “And the mid-term review looks to be having little effect on the level of demand,” he suggested.

Having handled two recent farm sales on behalf of clients (one buying and one selling) he said the availability or not of entitlement to historic SFP was not affecting prices. “Typical values remain between 2750/acre and 3000/acre discounting a farmhouse or buildings.”

These values are typical for the southern parts of the region where progressive farmers looking for expansion opportunities are investing regardless of mid-term review entitlement, said the company.

Notts saw only 788 acres of land for sale and over half of that was taken up by one farm. Unusually, selling agent JH Walter decided to sell the 400-acre Manners Estate at Blidworth in 18 lots by auction. However, a local businessman and farmer made a pre-emptive bid for the whole property.

“We got an offer we couldn’t refuse,” said the firm’s Tim Atkinson. This suggested that the 2m guide was exceeded significantly.