After frenzy of 1996 a year of consolidation
AFTER the hectic activity of 1996 and rapidly rising prices throughout that year, 1997 has been a year of gradual consolidation.
In November 1996, feed wheat was trading at £90/t, while in November 1995 it had been £110, a reduction of 18%. In November 1997 it was trading at £78/t a further reduction of 13% and a total drop over the 24 month period of 31%. Thus, it is perhaps unsurprising that 1997 has been less frenetic.
We have begun to see farmer buyer resistance to values in the £3000-£3500/acre plus range and as always, when nervousness affects markets, the value differential for quality has and is widening.
However despite many experts predictions of value reductions, the supply of land up for sale has been very limited and all but the poorest of farms have sold. Interestingly there are still buyers prepared to pay more than £3000/acre as witnessed by several sales of blocks of land around Cambridge, and auction prices have achieved between £3500 and £4000/acre recently.
With a continuing upturn in residential values at the upper end of the market the residential element of farms has increasingly supported the intrinsic agricultural value.
We believe that the poorest land has reduced in value by up to 15% whilst the quality farms have remained reasonably static. For 1998 that trend seems certain to continue at least until the £ weakens and produce prices and profits rise in the arable sector.
As the year ends, most agents report a dearth of instructions. This combined with the a lack of any adverse announcement by the Chancellor on Nov 25 of an intended change to capital gains and inheritance tax seems certain to ensure continuing demand for vacant possession properties in the first quarter of the year.
As we enter 1998 the world stock markets are more volatile than ever and the £ now higher than for many years.
Against that background it is extremely difficult to predict what will happen to farmland values in 1998 and in the absence of any clear direction there is likely to be a continuing inclination to maintain the status quo.