Farmland Market Review - Oct to Dec 2011

Review of the English farmland market October – December 2011

English farmland values climb 14% in 2011

The key points are:

• Values for equipped farms and bare land continued to rise, so they have now risen continuously since the summer of 2009

This review is based on our database of all publicly marketed farmland over 50 acres, collated by our research team, and commentary on regional markets from our farm agency team

• 2011 was the first year more than 100,000 acres of equipped land was for sale since 2008 – but it was still not enough to meet demand

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Low supply continues to drive up prices 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.

Land for sale in England (acres) Land for sale 4Q in England 2011 (ac)

3Q 2011

2011 Whole

8,700

4Q2010

2010 Whole

(% change in last 12 months)

Bare land

2,800

23,400

2,200 (+28%)

23,100

Equipped farms

10,400 33,000 104,000

7,700 (+35%)

98,700

All land

13,200 41,700 127,300

9,900 (+33%)

121,800

But despite this increase in supply, the lack of availability can be seen when the figures for specific farm types in specific areas are looked at: Number of Number of farms for sale Land for sale in England in 2011 farms for sale over 250 acres

Dairy farms in North West and North East England

7

1

Arable farms in the South East

19

5

Livestock farms in the West Midlands

22

1

All types of farm over 1,000 acres

14

n/a

The market fundamentals that are driving prices up have not changed – the amount of land to buy is still very small and demand from farmers, in most places, remains strong.

North West – Simon Waller There is limited availability of good quality land for sale.

Good stock prices are helping to maintain grassland values whilst large blocks of arable land are still proving an attractive proposition despite the drop in cereal prices.

The market for equine units has slowed but this may be a reflection of the time of year. We have sold significant blocks of land to sitting agricultural tenants over the last quarter, and forestry and land to extend gardens is in strong demand.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £6,000 £6,000 £5,500 £5,500 £5,500 £5,000 £6,500 £6,000 £6,000 12 8 9 1,500 800 1,100

Yorkshire and Humber – Sam Tydeman There is still demand for good blocks of arable land but we are seeing a reduction in demand for smaller amenity or lifestyle parcels of land in some areas. We have recently concluded the sale of a 200 acre block of grade 3 land near York which saw strong demand from farming buyers; an offer has been accepted significantly over the guide price of £950,000. A 116 acre block of land in North Lincolnshire has attracted significant interest. In this more difficult market, more effort is needed to attract offers and even well established farming businesses are finding that banks are tightening their lending criteria.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £7,000 £6,000 £5,500 £4,750 £4,000 £4,000 £8,000 £7,500 £7,500 11 5 8 1,800 600 2,400

West Midlands – Ed de Lisle Prices have remained unchanged since the last quarter.

There is still demand for land but buyers are definitely more selective and want to ensure that all of their requirements from the property are being met. Two current sales are noteworthy: Middle Hill Farm, an equestrian farm in Gloucestershire, has generated a lot of interest from a broad range of purchasers looking for alternative investments or a residential farm with equestrian opportunities. In Wiltshire, Cowick Farm is a working farm which is attracting interest from investors wanting to get into farming.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £7,000 £6,500 £5,750 £5,100 £5,000 £4,750 £9,100 £9,000 £7,000 6 2 9 1,100 200 1,600

South West – Simon Derby The 4th quarter has been quieter in the South West although it continues to be the most active region for land sales. Demand continues to be strong from farmers for better arable land and there is still good non-farmer demand from people moving into the region.

Good livestock farms - in the right place and with the right equipment - continue to sell well. An interesting opportunity for investors is 397 acres of strategic land on the edge of Plymouth.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £7,500 £5,300 £5,100 £5,600 £5,400 £4,900 £9,600 £6,300 £5,800 16 22 17 3,800 2,700 2,500

North East – Iain Welsh There is still a shortage of supply with some large differences in values across the region so in-depth local knowledge is essential. There is clear evidence of a two tier market: quality land in desirable farming locations is selling well and under competition; poorer land in less desirable locations is price sensitive and is taking much longer to sell. We recently had a very successful auction selling 20 acres of arable land between Darlington and Barnard Castle. One lot doubled its guide price and sold for £12,725 per acre. We have got 130 acres of productive arable and grassland available in County Durham with other sales in the pipeline, including a 214 acre farm and equestrian unit near Durham City.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £5,800 £5,800 £4,500 £4,000 £4,000 £3,700 £7,500 £7,500 £7,250 0 2 3 0 800 300

East Midlands – Luke Humphries 30 Smiths Gore offices across the UK

With such a limited market in the final quarter it is hard to demonstrate any significant changes in the land market but we don’t feel that prices have changed. Demand appears to remain strong but is more selective so poorer land or land which has any complications is becoming harder to sell.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £7,300 £7,000 £5,750 £5,000 £5,900 £4,750 £9,500 £9,000 £7,000 8 11 6 1,900 2,000 700

East of England – Bennett Swayne The rate of price increases has slowed down. Buyers are still looking to invest but are not always satisfied by the supply of land and farms on the market, which is thin.

There are some very strong prices being paid where there is competition amongst neighbours or the quality is exceptionally good but some blocks are sticking. Big blocks of land continue to sell well, however smaller and marginal areas of land are becoming a more specialist market with a smaller range of buyers. The on-going drought conditions in the region could lower demand for irrigated land and affect prices.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £7,000 £6,000 £5,000 £4,250 £3,000 £3,000 £7,700 £7,000 £7,000 5 7 7 900 1,100 700

South East – David Slack Land values have reached a plateau and buyers have become more selective. We are finding that land has to be correctly priced and look ‘neat and tidy’ to get the interest.

There is still very little land or farms on the market.

Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) No. of farms for sale Total area for sale (ac)

2011 2010 2009 £5,750 £5,200 £5,000 £5,500 £5,000 £4,800 £7,500 £7,000 £7,000 11 13 10 2,100 1,700 1,700

Equipped farm values continue to grow faster than bare land Equipped land values rose by 2% in the final quarter and by 13% over 2011 as a whole.

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 have also risen, by 3% in the final quarter and by 12% in 2011 as a whole.

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

Average price in England (£/ac)

4Q 2011

(% change since 3Q2011)

3Q 2011

2011 Whole

(% change in year)

4Q 2010

2010 Whole

(% change in (% change last 12 months) in year)

Bare land

£6,000 £5,800 (+3%)

12%

£5,400 (+12%)

12%

Equipped farms

£9,400 £9,200 (+2%)

13%

£8,300 (+13%)

16%

All land

£8,700 £8,400 (+3%)

14%

£7,600 (+14%)

13%

There is growing evidence of a two-tier market – quality land in desirable farming locations continues to sell well but poorer land in less desirable locations is finding fewer buyers so lotting and the quality of marketing is becoming more important.

NB The regional bare and equipped values quoted are based on the opinions of our farm agents; the data for number of sales and acreage for sale are based on our database of all publicly marketed farmland over 50 acres.

All data is for 4Q.

Summary We think that the outlook for 2012 is positive. Despite the market becoming more discerning, the price of the best quality land should be supported by rising commodity markets and a continuing positive outlook for UK agriculture.

It is too early to say what the effect of the CAP Reform will be however it is more likely to be negative if the proposals for capping payments, only making payments to active farmers and greening, remain unchanged.

Our analysis of land markets during previous reforms found that the effect of the reform on prices is variable – it can be positive or negative – but that the amount of land for sale before a reform always drops. Therefore we expect less land to be marketed in 2012; the only factor that might increase supply is if landowners think that the market has peaked and want to cash in but previous reforms suggest this will not happen.

We do not expect the reforms to the planning system to have a significant effect on values or the amount for sale, and certainly not until the market for residential property gets better. The Eurozone crisis is likely to mean more investors want to move into a stronger currency so there should be greater demand for bigger units from investors – if they can find any!

We therefore expect prices to continue to rise and our model of the English farmland market forecasts a 7% increase for 2012.

Contacts Our farm agents would be pleased to give you 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

➲

J ohn Coleman Kay Paton

Edinburgh Dumfries

0131 5617103 01387 274394

Scotland - Northern

➲

Jamie Watson

Fochabers

01343 823005

Northern England - Head of Farm Agency

➲

Sam Tydeman

York

01904 756303

North East

➲

Iain Welsh

Darlington

01325 370500

North West

➲

Simon Waller

Preston

01772 663124

Yorkshire and Humber

➲

Sam Tydeman

York

01904 756303

West Midlands ➲ Ed de Lisle Lichfield

01543 261987

East Midlands ➲ Luke Humphries Peterborough

Robert Bennett Lincoln

01733 559322 01522 539555

East of England ➲ Bennett Swayne Newmarket

01638 676748

Wales ➲ Charles Orr-Ewing Sennybridge

01874 636868

Southern England - Head of Farm Agency

➲

Giles Wordsworth

Oxford

South East ➲ David Slack Maidstone

Giles Wordsworth Oxford

Harry St John Oxford South West

➲

imon Derby S Giles Wordsworth Harry St John Toby Perry

Taunton Oxford Oxford Exeter

01865 733302 01732 879053 01865 733302 01865 733304 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