Land agents are hoping the falling value of the pound will bring buyers with euros to spend back into the UK farmland market.
Sterling has crashed to new lows against the European single currency since last September, almost reaching parity at the start of the year. Official confirmation of recession, the closure of high street stores and significant job losses have caused further turbulence, with €1 worth 92.5p on Tuesday, 27 January, compared with 74p one year ago.
Christopher Miles of Savills said the swing in currency had given potential overseas buyers of farmland a strategic advantage. “The last two or three years have seen a big influx of overseas buyers who historically weren’t influenced by currency the attraction of UK farmland was that it looked better value than some other European countries and had tax advantages too. Also, for those borrowing, there was cheap credit available. But the changes we’ve seen mean overseas buyers who were relying on high gearing to fund their purchases have vanished.”
But those buyers remaining had significant funds and were in a much stronger position than in 2008, he said. “In 2008 an overseas buy in the eurozone needed to spend €6200 to buy land at £5000/acre, and that was even higher in 2007. But those buyers have now seen a 30% improvement.”
What was likely to frustrate overseas buyers looking to exploit the value of the euro against a weaker sterling was a dearth of farms to buy, particularly in the short term, said Mr Miles. “There’s still a great deal of uncertainty out there and quite a few people watching and waiting before making a decision whether to sell their farms.”
Brown & Co’s Robert Fairey agrees. “Potential vendors are reconsidering what they can do with the purchase proceeds and alternatives open to them. Putting money into the banks doesn’t look attractive at the moment, nor does the stock market, so this may lead to reconsideration over whether to part with a farm. There will be more farms for sale going forward, but it will be April or May, rather than January or February before we see them.”
Humberts Andrew Pearce said his firm had received more “telephone traffic” as the pound had continued to slide. “There has been more contact from overseas buyers who are considering entering the market place here.” Such buyers were primarily after good quality land which was well-equipped and offered economies of scale, he said. I don’t see many acres coming to the market this spring. There is land available privately, too, but the volume of that side of the market is significantly reduced, too.”
Recent advertising by agent Fisher German had seen a significant number of overseas respondents, said the firm’s Andrew Ranson. “We’re quite confident about the number of buyers. If anything it is the number of enquiries from vendors which is missing.”