Christopher Miles of Savills outlines what the key features of the East Anglian land market were in 2014 and speculates what 2015 could bring.
2014 market – key features
Supply increased compared with 2013, but this was not spread evenly geographically and most prime areas lacked new opportunities. This pushed average prices up by another 10%, with most of the growth occurring in the first half of the year as weakening commodity markets affected confidence in the second half.
With rising prices in prime areas, growth in other areas has been undermined by fickle demand as farming businesses come to terms with a challenging medium-term outlook. The range of land values is therefore as large as it has ever been.
- UK farmland is perceived as one of the safest forms of investment, attracting interest from around the world.
- Some investors have sold to capture the growth in capital values, which in places has quadrupled since 2005.
- Lack of supply encouraged some farmers to take on units with residential assets in order to acquire more acres.
2015 outlook – main market influences
- Pressure on farm cashflows with the significant weakening of commodity prices, a 7% exchange rate hit on subsidies and the prospect of interest rate rises.
- Uncertainty about the outcome of the general election, including potential taxation of high-value property and pressure on the current, favourable capital tax regime.
- Compliance with the new greening rules may affect cropping choice and farm business incomes.
2015 outlook – what will happen to land prices?
- More muted average growth (5%) than has been recorded for the past decade, but this will mask an increasingly diverse marketplace in value terms.
- Corporate and institutional players will continue to trade, often selling less strategically located blocks of land and farms in order to buy an acreage that better fits in with their wider portfolio.
How much land will come on to the market in 2015?
We expect greater supply than this year, though in peaks and troughs. It is likely to include a number of smaller offerings where sales are debt-related and it could be that market activity takes place in the second half of the year.
Easiest type of farm or land to sell in 2015
500-1,500 acres of quality cereal growing land or irrigated mixed cropping ground.
Most difficult farm to sell in 2015
Properties where the balance of assets is out of proportion; say a smaller farm with significant non-agricultural elements.