Demand is High, Availability is Not - We consider the current state of play in the sector, and what the future may hold.
With supply shortages, demand booms and the upheaval of standard practices, the rural property sector had to adapt to rapidly changing times across 2020.
As we start the second quarter of this year now, prices for sheep and store cattle are reaching record highs, and milk prices have risen along with good returns for grain and cereals. Providing insight into what this means for resulting land prices, here Thomas Armstrong, Director and Chartered Surveyor for H&H Land & Estates, examines current market trends and buyer behaviours, and elaborates on the sector’s current demand surplus.
“Never across my working career have I seen demand for land outstripping supply as much as now. Good farms in good locations will always sell, and over the last few years, across the North land has been consistently well sought after. However, moving into the second quarter of 2021, we are seeing extraordinary eagerness from buyers wanting to purchase farms and land. Unfortunately, the supply is almost non-existent.
“Naturally, one key reason to explain such a large demand boom would be lack of supply. Even though increasingly now farms tend to be launched throughout the year, traditionally springtime is when they would usually be brought onto the market. This year this just isn’t happening, and it is not just here in the North. Across the UK, very few farms or land of any form are coming forward.
“One likely explanation for the demise of supply could be the changing information and legislation surrounding the new farm payments, which have suggested that farmers could be offered seven-year payments as retirement packages. It may be that that individuals who were perhaps thinking of selling this year have put sales on hold; instead choosing to wait until more details on the subsidy reforms are released which would directly impact them.
“Although new farm payment schemes have been brought in to support and give the next generation new opportunities, due to the current lack of the land and farms being traded, these opportunities are unfortunately not being realised. We are finding that this isn’t just in terms of land sales - this is also the case for Farm Business Tenancies, with people are not wanting to release their FBT’s until they know what the future holds for them.
“Many discussions will also be taking place around kitchen tables concerning everything from COVID-19 to trade talks, and on the rumours of a pay out from Basic Farm Payment. So, with people sitting on potential sales for whatever reason, for now we can expect to see a limited supply coming to the market.
“As a result, bringing property to the market at this time could act as a powerful opportunity to take advantage of, and capitalise on, the current state of play with limited supply and over demand.
“We have a sizeable list of buyers looking for quality farms, and bare blocks of land by those wanting to expand their acreages. Land with strong amenity value is also considerably sought after, and our team has successfully sold several small parcels of amenity land in recent weeks.
“Additionally, over and above the land and property itself, access for both feeding livestock and to allow for large articulated vehicles is now vitally important to many buyers, with farms becoming such large–scale enterprises now. Indeed, access is a further powerful selling point likely to attract additional interest or premiums.
“Other factors driving demand right now include the low interest rate, the stamp duty holiday and competing land uses. The pandemic has resulted in people revaluating their lifestyle choices, with a huge number choosing to relocate from busy cities to more spacious rural locations. People are now seeking more space, both indoors and outdoors, and for us at H&H Land & Estates, this is proving to be very much the case across the North.
“This has caused the price of residential houses offering added amenity or lifestyle opportunities to rise considerably, and we have a long list of people waiting for a rural property with a few acres of land. So, if anyone has something to sell which meets this criterion, there will certainly be many keen buyers!
“Lastly, spring has also traditionally been the annual time for grass lets. While there has been land being traded here in our offices across the North, we have received minimal new instructions. This has resulted in tremendous prices being achieved, well up on last year. An example of this was a 51.67acre instruction at Southwaite, with no fewer than 13 applicants. Both the interest and the prices offered were far stronger than we anticipated.
“Looking ahead, and in the medium term, the next five years could see potential changes in future taxation regimes, and a subsequent increased supply of land and farms coming to the market. This could potentially drive prices down. We can also anticipate that as the subsidy reform begins to take effect there may be some volatility in the market.
“So, it may be that those who are aiming to sell in the next few years should ask themselves: ‘Do I use the opportunity now to take advantage of this strong trade, strong demand and unprecedented shortage of supply, as it could be too late once the horse has bolted?”