Smiths Gore Farmland Annual Review

English farmland market review 2011 The overall story of the English farmland market in 2011 was continuing price rises - to record levels - and little for sale

January - March

April - June

Farmland prices rose by 4% to an all time high of £7,900 per acre, showing the strength of the market compared with others, like the housing market.

Equipped farm values rose to an average of £8,600 per acre – up 4% - and have now recovered all of the drop since the peak of the market in 2008.

Bare land values averaged £5,600 per acre – up 5% on the previous quarter.

Prices continue to rise due to strong demand, from both farmer and non-farmer buyers, and the continuing low supply of land for sale, as shown by the amount of land for sale in the six autumn and winter months:

This is traditionally the most active quarter for sales - the Spring into Summer Flush – and the average price breaks the £20,000 per hectare barrier for the first time.

Equipped farm values grew faster than bare values in the quarter and over the previous 12 months, so a reverse of what was happening between 2008 and 2010. Equipped values rose 4% in the second quarter and so have grown by 8% since the start of the year and by 20% in the last 12 months, compared with 2%, 6% and 11% over the same periods for bare land.

At the time we said that we did not think that prices had peaked. Our farmland model suggested that prices will continue to rise as the wider UK economy starts to grow again.

But the main driver of the market remained the balance of demand and supply – and supply had not grown enough to satisfy strong demand from farmers and non-farmers.

Although there was a flush of land marketed in the first half of the quarter, supply dropped back sharply in the latter part to finish the quarter just 5% more than a year ago and less than in 2009. So the dominant factor in the market – constricted supply – has not changed.

We also noted a more subtle change in supply. While the overall amount of land for sale rose slightly, the amount of bare land dipped by 9% by area. This was more than offset by a rise in the amount of equipped farms for sale, up 8% by area. Most of this increase was in arable farms for sale, as the owners tried to cash in on high commodity prices and sentiment in the sector.

Land for sale in England between September and March (acres) 2007/08 40,500 2008/09 38,500 2009/10 27,300 2010/11 26,000 Source: Smiths Gore

Jan – Mar 1Q2011

Average price in England - Equipped farms (per acre)

Apr – Jun 2Q2011

Jul – Sep 3Q2011

Oct – Dec 4Q2011

£8,600

£9,000

£9,200

£9,400

(% change since previous quarter)

4%

4%

3%

2%

(% change since start of 2011)

4%

8%

10%

13%

(% change in previous 12 months)

19%

20%

15%

13%

Land for sale in England - Equipped farms (acres)

11,400

48,900

33,000

10,400

(Amount for sale since start of 2011) (acres)

11,400

60,200

93,500

104,000

-2%

6%

3%

5%

(% change in amount for sale since start of 2011 compared with 2010)

Average price in England - Bare land (per acre)

£5,600

£5,700

£5,800

£6,000

(% change since previous quarter)

5%

2%

2%

3%

(% change since start of 2011)

5%

6%

9%

12%

(% change in previous 12 months)

15%

11%

12%

12%

Land for sale in England - Bare land (acres)

4,900

6,800

8,700

2,800

(Amount for sale since start of 2011)

4,900

11,800

20,500

23,400

(% change in amount for sale since start of 2011 compared with 2010)

12%

-1%

-2%

1%

Average price in England - All land (per acre)

£7,900

£8,200

£8,400

£8,700

(% change since previous quarter)

4%

4%

3%

3%

(% change since start of 2011)

4%

7%

10%

14%

(% change in previous 12 months)

18%

18%

15%

14%

Land for sale in England All land (acres)

16,400

55,700

41,700

13,200

(Amount for sale since start of 2011) (acres)

16,400

72,100

114,000

127,300

2%

5%

2%

5%

(% change in amount for sale since start of 2011 compared with 2010)

July - September

October - December

We continue to report prices rising and think that other agent’s assessment of prices dropping, which is based on their agents’ opinions, is not supported by detailed analysis of actual land for sale.

Although the pace of increase has slowed, none of our regional valuers report prices dropping and this is supported by our market research.

The farmland market continues to remain more buoyant than other sectors, such as housing. However, the gap between the best and less attractive land has widened. There are certainly fewer buyers in the market for the less attractive land and some of it is struggling to sell. Vendors must be realistic in their asking prices and it will need good marketing and lotting.

Equipped farm values continue to grow faster than bare land.

Equipped values rose 3% in the quarter, 10% since the start of the year and by 15% in the last 12 months; bare land has risen by 2%, 9% and 12% over the same periods.

Demand from farmers, in most places, remains strong and supply constricted. 41,700 acres were marketed, which is 3% less than in the same period in 2010.

The increase in the amount of arable land for sale that we observed in the second quarter continued -16,100 acres marketed in 3Q2011 compared with 12,100 acres in 3Q2010.

In contrast, the amount of livestock land for sale dropped by almost half compared with 2010.

Values for equipped farms and bare land continued to rise and have now risen continuously since the summer of 2009.

Equipped land values rose by 2% in the quarter and so finish 2011 13% up. This impressive rise in values followed a 16% rise in 2010, so values have risen by a third since the recent low point in the summer of 2009.

Bare land values rose by 3% and by 12% in 2011 as a whole.

But, although bare land values rose slightly more slowly than equipped ones, their greater resilience in 2008 and 2009 means that they have risen by 50% since the start of 2008, making it one of the best performing assets during the recession.

Although the amount of land for sale remains at historically low levels, there were more equipped farms for sale in 2011 than in 2010 and 2009, and more units for sale in the final quarter of 2011 as well. 2011 was the first time more than 100,000 acres of equipped land was for sale since 2008.

There were the fewest bare land sales in 4Q2011 for four years but, for the year as a whole, a similar amount of land was marketed in 2011 as in 2010 and more than in 2009 and 2008.

Prices continue to increase for both bare land and equipped farms Farmland values in England (£/acre) Source: Smiths Gore Research £/acre 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

Bare Land

Equipped Land

All Land

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2007 2008 2009 2010 2011

Although more acres were for sale than in 2010, the market is still too small to meet demand Area of farmland markets in England

Source: Smiths Gore Research Acres 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2006 2007 2008 2009 2010 2011

Bare Land

Equipped Land

All Land

Number of equipped farms and bare land units for sale in England in 2011 The lack of land for sale is demonstrated when we look at the types of farm for sale by region. For example, nationally there were only 21 dairy farms for sale and only 16 farms over 750 acres. There were significant differences in the amounts for sale in the regions. Only 3 arable farms over 250 acres were for sale in the whole of North East and North West England, while the South West remained the most active region in terms of numbers of sales and by acreage.

All land

Arable

Arable Total

Farm Size*

S

M

L

East Midlands

24

10

3

East of England

21

15

North East

1

North West

Dairy S

M

37

0

0

4

40

0

2

0

3

8

1

0

South East

14

4

South West

9

West Midlands

Dairy Total

Livestock Livestock Total S

M

0

16

2

0

0

4

0

0

0

9

6

1

1

19

0

2

0

11

8

6

0

Yorkshire and The Humber

14

11

Grand Total

99

51

*Farm Size

S = Small <250ac

Mixed

Mixed Total

Grand Total

S

M

L

18

19

8

2

29

84

0

4

10

5

1

16

60

5

1

6

3

2

1

6

15

7

41

6

47

5

4

1

10

73

0

0

42

5

47

18

6

1

25

93

7

4

11

84

8

92

35

9

1

45

160

14

1

2

3

20

1

21

19

4

0

23

61

0

25

0

0

0

16

1

17

11

7

1

19

61

8

158

14

7

21

228 24

252

120 45

8

173

607

M = Medium <750ac

L = Large >750ac

Contacts Our farm agents would be pleased to give your more information about the land market in your region or county.

Please do not hesitate to contact them: National Head of Farm Agency

➲

Giles Wordsworth

Oxford

01865 733302

Scotland - Head of Farm Agency

John Coleman

Edinburgh

0131 5617103

Scotland - Southern

➲ ➲

John Coleman Kay Paton

Edinburgh Dumfries

0131 5617103 01387 274394

Scotland - Northern

➲

Jamie Watson

Fochabers

01343 823005

➲ Sam Tydeman York North East ➲ Iain Welsh Darlington North West ➲ Simon Waller Preston Yorkshire and Humber ➲ Sam Tydeman York West Midlands ➲ Ed de Lisle Lichfield East Midlands ➲ Luke Humphries Peterborough Northern England - Head of Farm Agency

Robert Bennett

Lincoln

01904 756303 01325 370500 01772 663124 01904 756303 01543 261987 01733 559322 01522 539555

East of England ➲ Bennett Swayne Newmarket

01638 676748

Wales ➲ Charles Orr-Ewing Sennybridge

01874 636868

➲ Giles Wordsworth Oxford South East ➲ David Slack Maidstone

01865 733302

Southern England - Head of Farm Agency

South West

Giles Wordsworth Harry St John

Oxford Oxford

01732 879053 01865 733302 01865 733304

➲

Simon Derby Giles Wordsworth Harry St John Toby Perry

Taunton Oxford Oxford Exeter

01823 445036 01865 733302 01865 733304 01392 294891

If you have any questions about the review, please contact Dr Jason Beedell, Head of Research, on 01733 866562 or jason.beedell@smithsgore.co.uk