45% gap between farmland valuesand productive worth

31 July 1998

45% gap between farmland values
and productive worth

THERE is a “yawning gap” of as much as 45% between land prices and the underlying productive worth of farmland, according to Jim Ward, head of research at FDPSavills.

But despite the gap, farmers are not rushing to sell up, according to an analysis of the farming land market in the Financial Times.

The article suggests some farmers are looking to expand if a neighbouring farm becomes available because it may be a “now-or-never decision to buy”.

It also identifies demand for farms from non-farmers and suggests City bonuses are powering the demand from this quarter.

Another estate agency, Strutt and Parker, identifies a rise in the number of farms on the market. Michael Fiddes, in charge of the farm arm of the agency, says this does not reflect an increase in the amount becoming available, but is because agricultural land is taking longer to sell.

Mr Fiddes believes it is the dedicated commercial farms where prices are more closely aligned to productive worth. In those areas, particularly where the land is of poor quality, there has been a decline in the price of land.

The article concludes by suggesting that there is a two-tier market in farm land developing. City bonuses are funding “aspirations to a rural lifestyle”. But commercial farm values, dependent on farmer buyers, are falling. Here, there is a correlation between price and productive worth.

  • Financial Times 31/07/98 page 12 (The Property Market)

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