Uncertainty is expected to fuel volatility in land prices
Volatility in land prices is anticipated in the coming year, with sale results potentially varying significantly for similar land from one area to another depending on the level of competition and supply availability.
Product prices and future confidence in the sector, together with support from lending organisations, will also be critical components.
The results of the H2 2016 RICS/RAU Rural Land Market Survey indicated less demand and transaction-based price index falls for the second consecutive report, resulting in a 12-month price expectation forecast remaining negative.
According to the survey, compared to a year ago, the price of British farmland (with residential components) during the latter part of 2016 fell seven per cent to £10,233 per acre, while bare land prices slightly declined by three per cent on the year. Also, 63 per cent of buyers were farmers, with ‘lifestyle’ buyers accounting for less than a quarter of purchases.
It is important to emphasise that these are average figures across Great Britain and in Wales there can be a significant variation in market prices between blocks of land, with location and quality being key influencing factors.
The level of farmgate prices and perceived confidence in the future viability of agricultural enterprises will no doubt be contributory factors that will influence demand for commercial parcels and units, albeit market forces will prevail.
The amount of land being offered for sale in certain areas of North Wales remains limited and prices are particularly dependent on the degree of competition which may vary between localities. Quality parcels are still expected to attract firm demand.
Last year also saw a moderation in rents following the squeeze on farm incomes and depressed commodity prices. The survey reports average arable rents fell by five per cent in H2, translating to an annual decline of 11 per cent. Average pasture rents in Great Britain were down 7.9 per cent on the year too. However this does not necessarily provide evidence as to a decline in rents for short term lets, which very often tend to buck the trend.
Eifion Bibby of Davis Meade Property Consultants
