Buoyancy is not hit by incomes decline

9 January 1998

Buoyancy is not hit by incomes decline

LAND values continued rising until the third quarter of 1997, despite the fall in farm incomes across many agricultural sectors during the first six months of the year.

And the strong demand for good estates and large farms from mainly non-farming purchasers – often motivated by reinvestment relief – has yet to be met.

"Land values increased by 5-10% during the year, with good quality arable land achieving between £2500 and £3000/acre in the south-west," says David Hebditch, Humberts.

However, there were significant regional variations with "hot spots" occurring in some areas including the Midlands where there was an extreme shortage of land for sale.

Also, most farmers previously wanted to remain in their local area, however, the current market shortage has provoked many to relocate nationally in order to meet their requirements.

"Demand for commercial farms and bare land remained strong in 1997, and neighbouring farmers took advantage of low interest rates and profits made in recent years, to increase farm acreages in an attempt to spread fixed costs and strengthen their position for the less profitable future," he said.

Unfortunately, 1997 saw an increase in the demise of the small, lowland mixed livestock units which have been badly affected by the BSE crisis and falling cereal prices. Some farmers in this category who qualify for retirement relief are now selling up.

He maintains that the current shortage of agricultural land on the market should keep values at present levels, but possible changes to the tax regime due in the spring Budget and the continuing pessimistic economic trading factors are worrying to farmers on smaller acreages who are unable to expand or diversify.

"More land could be on the market during 1998 due to the financial hardship met by both the smaller and livestock unit farmers," he said.

Also, Devon-based Charles Wreford-Brown, Luscombe Maye Hands Hughes, says values are likely to fall into two tiers. Quality commercial farms and smaller residential type farms of up to 100 acres – offering an appealing house and buildings – will hold their value.

And bare land subject to non-farming interest, or neighbouring farmers wanting to expand will maintain present values with considerably less paid for land falling outside these areas of interest, he said.

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