Recent cooling in market no cause for concern say Carter Jonas

In the first three quarters of 2015 agricultural land values rose by 2.5%, the lowest rate of increase recorded since 2009, say experts Carter Jonas in their latest market report.

It notes the purchasing activity of farming buyers has been dampened by lower commodity prices and the implications on farm profitability, cash flows and the serviceability of debt.

In contrast, continuing economic recovery has boosted the development market with evidence of more ‘hope’ purchases. Transactions have also been driven by those who want to avoid paying capital gains tax by re-investing profit from sales of land back into land.

Oliver Bateman, a partner at the Carter Jonas Kendal office, says these features apply locally with the addition of a two tier market still in evidence.

“Decent commercial bare farmland in Cumbria, without any development potential, has been making around £6,000 - £8,000 per acre in recent years” he said. Yet smaller plots can attract a great deal of interest from neighbouring farmers looking to bring in efficiencies by enlarging. We’ve seen land sell for £10,000 and £12,000 an acre to the north and south of Kendal. And for as much as £15,000 in Dentdale for high quality, valley bottom land. This means some farmland costs more than seven times what it did when the RICS first began recording rural land market data in 1994. Land cost £2,028 per acre then.

“With the market cooling we are still forecasting that agricultural land will remain an attractive and profitable asset class over the long-term. Although it remains to be seen how the recent flooding will impact on values. In some areas, such as Dentdale, prices have remained strong. The greatest impact may be where flooding has occurred for the first time, or where it has been especially extensive. In the case of the latter - such as the Lyth valley – land quality and values already vary quite significantly” added Oliver Bateman.

“In the last year alone we have taken on the management of several new estates and we’ve handled more farm and land sales in Cumbria and North Lancashire than ever before. Partly as a response to this we are recruiting for a new rural graduate which will increase the team of surveyors to eight. ”