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What is the future for UK farmland prices?

Every solar farm and anaerobic digester built is taking land out of agriculture’s traditional role of food production. Other factors reducing land for food production include infrastructure development such as road and rail, as well as commercial and residential development. In England alone the government is driving for one million houses to be built in the next five years.  Once taken out of agriculture and food production - it’s gone for good.

Despite the continued reduction in the finite resource of land, the impact of low world market commodity prices is also an influence. 

Technology is countering the diminishing land resource with productivity continuing to increase thanks to scientific research and development with world leaders targeting to double world food production in the next 15 years.

So what effect do these conflicting influences have on land prices?

The amount of land sold to benchmark against remains minimal. A few very large enterprises have come to the open market in the eastern counties, while in the west of the country working farms and land for sale remain in short supply.

The market in the eastern counties, fuelled by these few very large sales, has been supported by investor clients seeing agricultural land as a finite and diminishing resource and therefore a good long term investment.

In the west of the country the buyers generally remain active farmers who recognise that if they are to grow their enterprise, buying nearby land at the market rate is one of the few options to growing the business and spreading costs.

Currently we have a 330 acre mixed holding on the market, located on the Shropshire -Welsh border at Bishops Castle. Interest is generally from the more progressive farmers in the region. Many of these farms already have three or four holdings - and simply need to expand within a manageable distance for men, machinery and livestock to travel.

In the perfect world these farms would like to have 800 to 1500 acres within one ring fence. However history dictates that such sizeable farms are extremely rare in this part of the world, because farming has prospered through traditional mixed family farms averaging 200 to 300 acres. 

Consolidation

This year has been one of consolidation for land prices, following the rapid increases experienced in recent years, there has been no fall back and land values continue to be robust. The two key factors leading to a strong land market remain accessibility and size. Both make a significant difference to the number of people a parcel is suitable for and will appeal to, and ultimately influences the final price. In addition low interest rates continue to hold, offering good long term deals.

It would be wrong to overlook the fact that the price of land has never directly reflected the return from agriculture; other factors have significantly affected the value, particularly tax reliefs. However, there is speculation and uncertainty over Inheritance Tax Relief and Capital Tax roll over relief.

Land is perceived as a recession proof investment attracting both business and private investors, the latter benefiting from amenities linked to the land, including sporting rights, wildlife, social standing and privacy all of which can go hand in hand with owning land.

Lot 2 arable land

Lot 2 Setting

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