Although Britain has voted to leave the EU, there is still a huge amount of uncertainty with many questions left unanswered. Shirley Busteed spoke to Ian Bailey from the Rural Research Department with Savills UK, along with his colleagues Charles Dudgeon, Scotland, and Alex Lawson, London, about the current UK land market and the impact of Brexit so far.

Describe the mood in the agricultural sector on the build-up to the Brexit referendum? We were getting a mix of messages, with half of farmers concerned with what subsidies and support there will be going forward, and the other half hoping for more freedom to farm.

Did the result have any immediate impact on the agricultural land market? We have not seen any material effect to date.

What are the concerns among farmers/buyers/sellers? Most are worried about profitability and cashflows. The key factors are low commodity prices, delayed BPS payments (both from 2015 and worried the same will happen in 2016/7). The weak pound during September will bring some relief, with increased subsidy payments for 2016.

For many years Irish customers have been regular buyers of land in the UK. Is there any possibility that foreign buyers might not be as prominent in the future? We would expect that the exchange rate advantages to offshore buyers should increase their interest in UK land – it is certainly happening in the commercial property market at the moment.

With regard to the property market, what positive effects will/could arise from Britain leaving the EU? The UK is still regarded as a safe environment to invest, irrespective of whether we are in Europe or not. The land market is transparent and provides a long-term low-risk investment, with additional opportunities from competitive uses of land - including renewable energy, commercial, leisure and development.

Briefly outline how the agricultural land market is performing at the moment? What is the outlook? When compared to 2015, there has been no major increase in the supply of land to the open market so far this year. The only exception was September, which recorded a significant increase of activity compared with the two previous years. However, this surge in activity was mainly located across England.

In the first three quarters of 2016, a total of 162,400 acres were offered for sale across Great Britain. This is 3% higher than the same period in 2015 and is the highest level since 2008 when 170,800 acres were brought to the market.

Across England, supply fell slightly, down by 1% to 108,500 acres. The volume of land to the market was notably down in many of the eastern region – east midlands (-8% to 16,150 acres), east of England (-12% to 16,800 acres) and southeast England (-4% to 18,500 acres). However, there was a significant increase in southwest England – up by 17% to 26,700 acres (which accounts for a fifth of the area publicly marketed across England this year).

Scotland experienced a slight increase – up by 4% to just under 40,000 acres, which is the highest level since 2003 when 45,700 acres were offered for sale.

Although coming from a lower base when compared to England and Scotland, the supply of land to the market in Wales so far this year has jumped by 43% to 14,000 acres. This is up from 9,300 acres in 2015.

Values

In terms of land values, the downward price trend continued into the third quarter of 2016, with average values of all types of farmland across Great Britain falling by 0.8%. This brings the total fall to date in 2016 to -2.3%.

Most of this price pressure was recorded in England and Wales where average values of all types of farmland have fallen by -2.6% and -1.5%, respectively so far this year. Prices remain unchanged across Scotland.

The fall in land values continues to be principally driven by pressure on the price of arable land, with the east of England and southeast England recording falls of between -2.5% to - 3% in the third quarter. This gives total falls of -3.6% to -7% since last December in this sector.

Although there is evidence of some pressure on the value of grassland - especially in the third quarter - it is significantly weaker than for arable land.

Outlook

Low commodity prices and patchy local demand are the principle factors affecting the land market. Although the uncertainty around Brexit will have had some impact, our research suggests this is fairly muted.

The prospect of a significant increase in farm subsidies this year due to the weak pound may help support land values as the increased support may slow debt-related sales and subsequently impact supply. The weak pound also benefits diversified income streams which are supported by domestic and overseas tourism. In addition, UK farmland is significantly more attractive for overseas buyers.