Monday 18 January 2016

Will there be an increase in land supply on the market during 2016?

Pressure from banks reviewing farm incomes could contribute to an anticipated increase in land supply on the market during 2016.

Bank reviews could encourage sales of off-lying parcels of land and motivate the sale of whole farms as pressure on commodity prices drives farmers from the industry. Other sellers may be tempted to take their profits from land bought before 2006 after which land prices started to rocket as the global recession set in.

While agricultural land values increased by 2.5 per cent in the first nine months of last year, 2015 witnessed the lowest rate of increase since 2009, indicating that now could be the time for owners to take profits and recycle their capital. 

Investment buyers driven by opportunity rather than location are still very active, creating pockets of activity that can see vastly different values in land sales only 10 miles apart.

Investors are not necessarily bad news for local farmers. While they add competition, which is great news for all those looking to sell, they invariably do not farm the land themselves and so create opportunities for innovative contractors or new farm business tenancies. 

During 2015 my firm, Carter Jonas dealt with the sale of 32,900 acres across the UK, both on and off the open market, with many of those sales made possible by our management teams negotiating deals to obtain vacant possession of farms prior to sale.

It seems the most active buyers across the country are either investors looking to avoid Inheritance Tax through Agricultural Property or Business Property Relief or those trying to avoid Capital Gains Tax following the sale of development land using Rollover Relief.  Farming purchasers are less visible and tend to focus on the 50 to 200 acre blocks in close proximity to the “home farm”.

Those seeking to take advantage of Rollover Relief have a finite three-year window to invest funds into land, which may explain why so many successful deals have been concluded in very short timescales as the three-year deadline approaches.

As the economic recovery has taken hold and government planning policy is encouraging house building, the development land market has kick-started, increasing the volume of roll-over receipts actively seeking a home in agricultural land. This source of demand is forecast to account for a growing proportion of the land buyer profile over the next few years, taking up the slack caused by the increasingly restrained purchasing activity of farming buyers. 

Across the country we have seen blocks of farmland of more than 1,000 acres sell strongly – farms and estates with shooting interest also sell well. Of particular importance is land of all descriptions outside towns and cities where development is taking place and therefore where there is roll-over money looking for a home.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

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