In today’s challenging times farmers can feel locked in a very lonely place. As the losses mount there may seem to be no obvious route out of the situation and discussing this with close family or friends might not be easy.
But it is often worth discussing your worries with someone you trust who also has an understanding of the farming industry. Whether that is your accountant, farm consultant or land agent doesn’t really matter. The important thing is to get a fresh perspective on your business because the answers may be staring you in the face but for one reason or other are difficult to address.
Probably the first thing you need is to get a clear understanding of your fixed and variable costs so you can start to benchmark yourself against industry standards and this may help to identify where the issues lie.
You might for example identify that you have high machinery costs which may indicate you need to consider running the farm in a different way, perhaps selling some machinery and employing contractors to carry out work you have traditionally done yourself. This could also lead to the possibility of reducing your labour requirements which could either release family labour to earn money off the farm or simply cut your employed labour.
Or you may identify high finance costs are a problem and restructuring your debt may be a possibility. If this is the case don’t be afraid of speaking to your bank manager. Most of them are pleased to hear from borrowers looking to take proactive action to address difficult times. Extending the length of a loan to reduce the level of capital repayments or paying interest only for a couple of years may help the farm through a short term cash flow problem.
These are just a few examples of things that you may identify if you take the time to look at your business closely and it often needs a trusted third party to ask you those difficult questions that will make a difference.
The easiest thing to do is nothing, but if you want your business to prosper in the long term, carrying on doing the same as you have done for decades is rarely the answer.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label investment. Show all posts
Showing posts with label investment. Show all posts
Thursday, 3 March 2016
Monday, 9 February 2015
Farmland remains an above inflation investment
According to Carter Jonas’ recent assessment of the rural property market, farmland remains an above inflation investment with prices increasing by 2.5 per cent in the second half of 2014 alone.
However this national figure disguises a growing regional variation, with values in the south and east of England achieving as much as £14,000 per acre while the South West witnessed sales averaging about £9,000 per acre.
The supply of land remains restricted, with a total of only 120,000 acres being openly marketed across the UK in 2014, a 15 per cent decrease from the previous year.
However, in contrast the volume of off-market sales rose significantly during 2014, accounting for a third of all Carter Jonas transactions across the country as buyers and sellers of large blocks of land are increasingly seeking private deals.
This trend is expected to continue and will help to sustain the growth in capital values which is forecast for 2015.
But, the picture is not an even one across or within regions because local demand and land quality are becoming increasingly important.
Isolated blocks of poor quality land in areas of little demand are not experiencing capital growth and in flood hit areas for example, capital values may be less than half of the average price in the region.
In contrast large blocks of land of 1,000 acres or more are proving most attractive, with this market being driven by cash rich investors in particular, where the inheritance tax relief available on agricultural land often makes it an attractive investment.
Despite this, farmers represented for the highest proportion of buyers on transactions completed by Carter Jonas during 2014 at 28 per cent, closely followed by “lifestyle” buyers (24 per cent) and investors (20 per cent).
The “halo effect” surrounding London remained significant and is expected to build momentum during 2015 as capital continues to flow from high earning individuals working in the City or even from abroad.
This effect is particularly prevalent in the country house market with properties up to about 50 acres, although holdings with larger parcels of land continue to benefit, albeit to a lesser extent.
The RICS/RAU Rural Land Market Survey for the second half of last year also shows demand for farmland continues to outpace supply and drive up prices.
However with land prices rising and rent for farm business tenancies remaining broadly stable, the investment yield on agricultural land has fallen to match its all time low of 1.6%.
Anecdotal evidence from RICS surveyors suggests that the recent fall in commodity prices may be tempering the pace of demand, particularly for smaller blocks, in all parts of the country.
However, with demand for land from outside the farming community still strong and the supply of land tight, it seems that despite the fall in farming profitability, the price of farmland will on average remain firm during 2015.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
However this national figure disguises a growing regional variation, with values in the south and east of England achieving as much as £14,000 per acre while the South West witnessed sales averaging about £9,000 per acre.
The supply of land remains restricted, with a total of only 120,000 acres being openly marketed across the UK in 2014, a 15 per cent decrease from the previous year.
However, in contrast the volume of off-market sales rose significantly during 2014, accounting for a third of all Carter Jonas transactions across the country as buyers and sellers of large blocks of land are increasingly seeking private deals.
This trend is expected to continue and will help to sustain the growth in capital values which is forecast for 2015.
But, the picture is not an even one across or within regions because local demand and land quality are becoming increasingly important.
Isolated blocks of poor quality land in areas of little demand are not experiencing capital growth and in flood hit areas for example, capital values may be less than half of the average price in the region.
In contrast large blocks of land of 1,000 acres or more are proving most attractive, with this market being driven by cash rich investors in particular, where the inheritance tax relief available on agricultural land often makes it an attractive investment.
Despite this, farmers represented for the highest proportion of buyers on transactions completed by Carter Jonas during 2014 at 28 per cent, closely followed by “lifestyle” buyers (24 per cent) and investors (20 per cent).
The “halo effect” surrounding London remained significant and is expected to build momentum during 2015 as capital continues to flow from high earning individuals working in the City or even from abroad.
This effect is particularly prevalent in the country house market with properties up to about 50 acres, although holdings with larger parcels of land continue to benefit, albeit to a lesser extent.
The RICS/RAU Rural Land Market Survey for the second half of last year also shows demand for farmland continues to outpace supply and drive up prices.
However with land prices rising and rent for farm business tenancies remaining broadly stable, the investment yield on agricultural land has fallen to match its all time low of 1.6%.
Anecdotal evidence from RICS surveyors suggests that the recent fall in commodity prices may be tempering the pace of demand, particularly for smaller blocks, in all parts of the country.
However, with demand for land from outside the farming community still strong and the supply of land tight, it seems that despite the fall in farming profitability, the price of farmland will on average remain firm during 2015.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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