Market Intelligence Report
Review of the English farmland market October – December 2012 Values climb 5% in 2012 to end on record high levels whilst supply is at an historic low
Key points: • The average price climbed to £9,100 per acre in 4Q2012, up 5% in 2012; our model estimated 7% • Prices broke the £9,000 barrier for the first time in the year • Both bare and equipped land values are at historic high levels • Bare land values rose by 6% in the quarter to £7,000 per acre, up 17% in 2012 • Equipped land values remained at £9,700 per acre, up 3% since the start of the year • Just over 90,000 acres were marketed in 2012, a record low level • For 2013, our model estimates that values will rise 7%. However, this may be bullish and the rise could be lower. We expect bare land prices to increase faster than equipped land • We expect less than 100,000 acres for sale again as there are few forced sales and as landowners wait for details for the CAP reform
smithsgore.co.uk
All figures in this review are from our comprehensive database of all sales of publicly marketed farmland in England over 50 acres; they exclude sales where the residential value of the sale is greater than 50% of the total. Therefore all figures are transaction-based, not opinion - based, apart from the regional values which are from our farm agents.
North West – Simon Waller
Lowest amount of land for sale ever
Little change in the figures reported last quarter. It will be interesting to see if more farms come to the market in 2013 due to lower profitability and bank borrowing requirements. As ever, successful businesses with a strong balance sheet will be in a good position to take advantage of land coming to the market. We have had a series of good sales and are finding that appropriately priced, traditional farms are generating lots of interest while farms with a significant residential element are more difficult to sell. In many cases, the strong land values are offsetting the reduction in value on the residential side. The amount of land coming to the market has reduced. We have recently sold a 278 acre equipped Grade 2 arable and stock farm near Garstang for over £7,000 per acre. Of four other recent sales, three sold at or above guide price including 276 acre Blackhall Wood Farm, Dalston, Cumbria; this is a good example of the comment above as although the land and farmhouse sold, four of the other five houses remain on the market.
Only 11,300 acres were marketed between 1 October and 31 December 2012, 15% less than in the same period of 2011.
Land for sale in England
4Q2011
4Q2012
(% change in last 12 months)
(acres)
2,800
Bare land
2,600
Equipped farms
8,700
All land
11,300
(-9%)
10,400 (-16%)
13,200 (-15%)
Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
The 90,500 acres marketed during 2012 was the lowest on record. There has never been less than 100,000 acres marketed before.
Land for sale in England
Bare land
17,300
Equipped farms
73,200
All land
24,400 (-29%)
104,600 (-30%)
Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
128,900
90,500
4Q2010 £6,000 £5,500 £6,000 8 800
As expected, we did not see a flush of new properties for sale. However, we were very busy before Christmas and put several properties under offer and completed on three bare land sales. The outlook for 2013 is positive and we anticipate a good supply of properties being brought to the market ahead of the traditional Spring market. However, the availability of top quality land is likely to remain very low. Strong competitive bidding is still driven by the demand from local farmers. With land values remaining strong and agricultural property continuing to be seen as an attractive investment, we believe values in 2013 will remain roughly unchanged.
(% change in last 12 months)
(acres)
4Q2011 £6,000 £5,500 £6,500 12 1,500
West Midlands – Ed de Lisle
2011
2012
4Q2012 £6,000 £5,500 £6,900 8 800
(-30%)
4Q2012 £6,800 £5,000 £7,500 3 200
4Q2011 £7,000 £5,100 £9,100 6 1,100
4Q2010 £6,500 £5,000 £9,000 1 200
South West – Simon Derby Demand remains strong from farmers and investors, and also for land with sporting interest. Lack of supply is keeping prices stable and high; very little has been sold this quarter and there have been very few good commercial farms available. Some farmers in the dairy sector are struggling and are selling off small blocks of land to neighbours in order to release some capital. Borrowing from banks is becoming more difficult and is affecting some sales. As in other regions, there is less strong demand for the residential element of equipped farms; this has resulted in some farmhouses being sold with as little land as possible so that the separated land can capitalise on strong land values. In terms of 2013, we do not expect the market to change significantly. Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
Area of English farmland marketed
4Q2012 £7,500 £5,800 £10,000 14 2,400
4Q2011 £7,500 £5,600 £9,600 13 2,800
4Q2010 £5,300 £5,400 £6,300 19 2,100
Area of English farmland marketed Source: Smiths Gore Research
South Central – Giles Wordsworth
7,000
70,000
All Land All land
6,000
60,000
Complete frustration in the market with increasing demand and supply reducing significantly. Purchasers are definitely more discerning due to the higher values and will compete keenly for good quality land but are quick to dismiss poorer land especially if overpriced. An auction of 105 acres of arable land in west Wiltshire and the sale of 100 acres equipped land in west Oxon confirmed these values.
5,000
50,000
4,000
Acres
40,000
Acres
3,000
30,000
2,000
Equipped land
20,000
Equipped
1,000
10,000
Bare
Bare land
0
0 07Q1
07Q1
07Q3
08Q1
08Q1
08Q3
09Q1
09Q1
09Q3
10Q1
10Q1
10Q3
11Q1
11Q1
11Q3
12Q1
12Q1
12Q3
Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
4Q2012 £7,750 £6,000 £10,000 8 1,600
4Q2011 – – – 8 1,800
4Q2010 – – – 5 800
NB The regional bare and equip on the opinions of our farm age acreage for sale from our comp of publicly marketed farmland exclude sales where the residen than 50% of the total. All data
North East – Iain Welsh There is even clearer evidence of a two tier market, which is influenced by quality and location. However, as in other regions, values for prime arable land are holding firm fuelled by a lack of supply. Realistic pricing still a key driver to ensure interest and sales, particularly with the more marginal land. We have agreed sales to a mixture of buyers including farmers, investors and those with an equestrian interest. I am not predicting any significant sales in the early part of the year although we have some good instructions in the pipeline for spring. We have recently sold 322 acres of grass, arable and woodland near Durham and a 214 acre equestrian centre. Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
4Q2012 £6,000 £4,250 £ 7,500 1 300
4Q2011 £5,800 £4,000 £7,500 0 0
4Q2010 £5,800 £4,000 £7,500 2 800
Yorkshire and Humber – Sam Tydeman This winter period has seen land sales all but stop. I believe that any decent farms put to the market in spring 2013 will perform very well. Demand for farms and bare land remains extremely good from all buyer groups. The arable sector is particularly strong although there has been a price differential for land of poorer quality or in less accessible locations. I don’t expect average farmland values to change much in 2013 but this will mask a distinctly two-tier market, where buyer interest and price drops away significantly with quality. Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
4Q2012 £7,000 £4,750 £8,000 5 1,800
4Q2011 £7,000 £4,750 £8,000 11 1,800
4Q2010 £6,000 £4,000 £7,500 5 600
East Midlands – Luke Humphries
Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
4Q2011 £7,300 £5,000 £9,500 8 1,900
The average value of English farmland reached £9,100 per acre in 4Q2012. It has risen by 5% since the start of 2012, compared with an increase of 14% during 2011. We had forecast a rise of 7% in 2012; equipped land values were weaker than we expected. Bare land values have risen strongly, by 6% in the final quarter and by a total of 17% over 2012. The performance of equipped properties was weaker in 2012, with values holding constant in the final quarter, and increasing by a total of 3% during the year. As we said in our previous quarterly update, the market may have reached a natural threshold in terms of equipped values but this will only be tested once more land becomes available in the Spring and Summer of 2013. Farmers remain the dominant buyers and are competing strongly for bare land. As most bare land sales are for smaller areas than equipped farms, more farmers can raise the capital to bid for them, so there tends to be more competition. There is growing evidence that availability of capital is affecting the market. However, 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.
Average price in England (£/ac)
A quiet end to the year but with the feeling that a good 2013 harvest will reignite the embers of the 2012 farmland market. The poor harvest in 2012 may have left buyers feeling slightly worse off than they might otherwise have been, but nothing fundamental has happened to change a market which is typified by strong prices and low supply. 4Q2012 £7,500 £5,100 £9,500 12 1,900
Bare and equipped values are at historic high levels
4Q2010 £7,000 £5,900 £9,000 11 2,000
4Q2012 (% change since 3Q2012)
3Q2012
£7,000
Bare land
(+6%)
Equipped farms
£9,700 (+0%)
£9,100
All land
(+0%)
2012 Whole (% change in year)
4Q2011
2011 Whole (% change in year)
£6,600
17%
£6,000
12%
£9,600
3%
£9,400
13%
£9,000
5%
£8,700
14%
East of England – Bennett Swayne
pped values quoted are based ents; the data on number and prehensive database of all sales in England over 50 acres; they ntial value of the sale is greater a is for 4Q.
Bare arable (£/ac) Bare pasture (£/ac) Equipped (£/ac) Number of farms for sale Total area for sale (ac)
4Q2012 £8,250 £5,000 £9,000 10 1,200
4Q2011 £7,000 £4,250 £7,700 5 900
4Q2010 £6,000 £3,000 £7,000 7 1,100
English farmland values English farmland values Source: Smiths Gore Research
10,000
10,000
Equipped
9,000
9,000
South East – David Slack
8,000
The land market in the South East has been very quiet through the Christmas period with very few transactions taking place and things have yet to get going in 2013. Prices remain firm and there is still strong demand for all types of land, at least partially due to low amounts for sale. 4Q2012 4Q2011 4Q2010 Bare arable (£/ac) £7,500 £5,750 £5,200 Bare pasture (£/ac) £6,000 £5,500 £5,000 Equipped (£/ac) £9,500 £7,500 £7,000 Number of farms for sale 6 7 12 Total area for sale (ac) 1,100 1,300 1,400
6,000
Equipped land
8,000
7,000
7,000 All land
All Land
6,000
£/ac
Smiths Gore offices
There has been very little fresh land on the market this quarter, but this is typical of the time of the year. Some strong prices are still being paid, especially for black soils and silt land, although I am less bullish about prices in 2013 as the poor harvest might have taken some steam out of farming demand for land. There are still some investors looking to buy land but they may remain fustrated as I do not anticipate more land for sale in 2013 than last year.
£/ac
5,000
5,000
4,000
Bare
4,000
Bare land
3,000
3,000
2,000
2,000
1,000
1,000
0 07Q1 0 07Q1
07Q3
08Q1
08Q1
08Q3
09Q1
09Q1
09Q3
10Q1
10Q1
10Q3
11Q1
11Q1
11Q3
12Q1
12Q1
12Q3
Forecasts for 2013 Average value of English farmland up +7%, according to our statistical model of the market. However, this may be bullish and the rise could be lower. We expect bare land prices to increase faster than equipped land. Market fundamentals have not changed significantly but there is more evidence of stable equipped prices or the market ‘taking a breather’. As we have said for the past two quarters, there is a two–tier market with the demand for and price of best quality land being well supported. Less attractive land is attracting fewer bidders and is being negatively affected by lack of finance for some buyers. We expect this to continue into 2013. Farmer buyers will also be less attracted to units with significant residential value so we are more positive about the outlook for bare compared with equipped land. Less than 100,000 acres for sale - again - as there are few forced sales and landowners wait to see the detail of the CAP reform. The main risk to this forecast is landowners selling at what they believe to be the top of the market. It might be expected that high prices would tempt more landowners to sell; however, other factors may have a stronger influence on the market during 2013. Our previous analysis has shown that the amount of land for sale reduces before a reform of the Common Agricultural Policy; the historic low experienced in 2012 continues to support this observation. We know now that the launch of the next generation of the Common Agricultural Policy is delayed until at least January 2015, so the reform’s influence on the market is likely to be prolonged. Also, more fundamental issues may affect the market over coming months, as the debate concerning the UK’s level of engagement in Europe continues. If the UK’s eligibility for CAP funding were to end, it is difficult to imagine the UK government offering support at the same level. Consequently a reduction in farm incomes could be expected, which is likely to have a small negative effect on land values. But this is highly unlikely.
Contacts Our regional 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
Northern England – Head of Farm Agency
Sam Tydeman
York
01904 756303
North East North West Yorkshire and Humber West Midlands East Midlands
Iain Welsh Simon Waller Sam Tydeman Ed de Lisle Luke Humphries Andrew Teanby
Darlington Clitheroe York Lichfield Peterborough Lincoln
01325 370500 01200 411052 01904 756303 01543 266407 01733 559322 01522 539555
Southern England – National Head of Farm Agency
Giles Wordsworth
Oxford
01865 733302
East of England South East and South Central South West
Bennett Swayne David Slack Giles Wordsworth Harry St John Simon Derby Toby Perry
Newmarket Maidstone Oxford Oxford Taunton Exeter
01638 676748 01732 879053 01865 733302 01865 733304 01823 445036 01392 294891
Wales
Charles Orr-Ewing
Sennybridge
01874 636868
Scotland – Head of Farm Agency
John Coleman
Edinburgh
0131 3440881
Southern Scotland Northern Scotland
John Coleman Kay Paton Jamie Watson
Edinburgh Dumfries Fochabers
0131 3440881 01387 274394 01343 823005
If you have any questions about this review, please contact Dr Jason Beedell, Head of Research, on 01733 866562 or jason.beedell@smithsgore.co.uk