Strong 2023 land market points to good demand this year

Despite an overall rise in the acreage for sale last year, farmland supply remains far lower than the market would like, leading to expectations for a continued strong trade in 2024.

The pool of waiting cash held by those who have sold land for development will have an influence. These funds must be rolled over within a three-year timeframe to defer capital gains tax.

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Andrew Chandler, head of farm agency at Carter Jonas, says evolving natural capital markets will also bring an increasing array of purchasers to the market.

The introduction of mandatory biodiversity net gain (BNG), now set to go live on 12 February 2024, will swell  the number of natural capital buyers.

“Pasture land values will benefit from natural capital gains, while arable supply may shrink as farmers assess profitability and take land out of production, exerting upward pressure on values”, Mr Chandler says.

However, he expects the rate of growth in farmland values to slow in 2024, an opinion shared by Savills, which forecasts weaker demand coinciding with an increase in supply.

Andrew Teanby, associate director rural research at Savills, says the rollover funds and agricultural support offerings will bolster arable land values.

Knight Frank predicts a “gradual uptick” in prices in 2024, driven by sustained demand and a modest increase in supply compared with 2023.

While some predict that the ending of the Basic Payment Scheme will result in more smaller family farms being offered for sale, Knight Frank’s head of farms and estates, Will Matthews, doesn’t expect this.

“These are incredibly resilient businesses, so I don’t think we will see this, as many are looking at the new environmental schemes,” he says.

What he does expect is a mix of motivated buyers contributing to a competitive landscape. 

2023 land market reviews

With rises in GB farmland values outpacing returns on equities and gold in 2023, and 20% more land publicly marketed, the sector delivered some headline-grabbing results.

The major land agents’ reports on how the farmland market performed in the past 12 months paint a largely positive picture.

Knight Frank’s Farmland Index showed that average farmland values in England surged by 2% in the final quarter, to more than £9,000/acre, for the first time.

The index tracks the average price of bare, productive arable and pasture land in England, based on opinions from the firm’s valuers and negotiators.

It takes into account the results of actual sales conducted by both the firm and its competitors, local market knowledge and industry sentiment. Overall, values increased by 7% in 2023, says the firm’s head of rural research, Andrew Shirley.

Carter Jonas, whose data covers England and Wales, reports rises in secondary and tertiary pasture land values outperforming those in most other land types, putting pasture land up by 0.9% to average £7,750/acre in the final quarter of 2023.

This was led predominantly by sales in the south and east of England. Arable land values finished the year at £9,583/acre, an increase of 0.7% from the previous quarter, says the firm’s Andrew Chandler.

Savills reports a 20% rise in the overall supply of farmland onto the public market in Great Britain last year compared with 2022.

In turn, this was 15% up on the average for the past five years, with the upward trend attributed to changes driven by agricultural transition.

Although 157,200 acres were marketed during 2023, this is less than the average of 162,000 acres traded between 2003 and 2016, says Andrew Teanby of Savills.

The position across England, Wales and Scotland isn’t consistent: availability was particularly high in the East Midlands and the north of England, but it fell below the five-year average in some regions – never by more than 10%, though.

Supply of smaller blocks of bare land ranging from 50-100 acres exceeded the five-year average by 60% in England.

Andrew Teanby says these sales were largely driven by death or succession, although debt was a factor in some.

For buyers looking for good-quality, commercial-scale blocks of land and equipped farms in England, there were few opportunities in many areas. Wales saw the biggest increase in activity, at 15,700 acres.

More land changed hands here in 2023 than in any year since 2000, surpassing the average for the past five years by more than 40% and driving up values by an average of 23% during the year.

Savills says retiring farmers with no successors were largely responsible for this surge.

In contrast, the 26,100 acres marketed in Scotland was similar to that offered in the previous two years.

Values remained stable, but with good interest in commercial, well-equipped farms from investors and buyers with rollover funds.

Non-farmers buy most open market land in 2023

It is the category of buyer that accounts for the standout fact in Strutt & Parker’s Farmland Database for England.

Non-farmers bought 56% of farms and estates sold on the open market in England in 2023 and, because these were largely transactions at scale, they also bought a bigger area of land than farmers.

At 44%, sales to farmers were at their lowest on record, says the firm’s Matthew Sudlow, reflecting caution because of higher interest rates, falling support income, cost pressures and the effects of bad weather.

Blocks of 100 acres-plus rise in value in variable market

Strutt & Parker’s Farmland Database records the sale of all farms, estates and blocks of publicly marketed land in England of more than 100 acres.

Variable interest resulted in fewer sales at or above the guide price in 2023, but average values were augmented by high prices paid for “best-in-class” properties, says the firm.

Its database recorded 75,500 acres openly marketed in 2023 – a slight fall, but still the second-highest total in the past five years.

The average price of arable land in England in blocks of more than 100 acres rose by 4% between 2022 and 2023, with an average paid of £11,300/acre.

More than 70% of the arable land traded in England during 2023 made more than £10,000/acre.

Pasture prices continued to show much greater variability, reflecting differences in quality.

Prices ranged from £4,000/acre to £16,100/acre, averaging £8,700/acre. With off-market sales factored in, the firm estimates that more than 100,000 acres were available, the highest for several years.

Alternative uses and land values

Alternative land uses are disruptors in the farmland market, and while that can often bolster prices achieved, it has little bearing on how land is valued for sale.

Knight Frank’s head of farms and estates, Will Matthews, says farmland is still valued in the traditional sense.

This is according to where it sits in terms of arable, pasture or woodland, and not whether it has potential for alternative uses such as biodiversity net gain, nutrient mitigation, carbon storage or other options.

It is the competition for land that determines the price achieved, he says.

“Only once you have your purchasers can you analyse what type of sale it was – for example, was it a carbon or amenity purchase or because the purchaser lived next door,” he said.

“You can then establish if the buyer has paid a premium or the price you would expect for traditional farmland values.”

Houses being built on farmland

© iStockphoto/Ceri Breeze

Machinery sales reflect farming changes

A rise in farm machinery dispersal sales could suggest that more farmers are exiting the industry or restructuring their businesses.

Savills says 71% more machinery sales took place in 2023 compared with 2015 – before Brexit, the pandemic and agricultural transition.