The latest annual agricultural land review, jointly compiled by the Society of Chartered Surveyors Ireland and Teagasc, reveals that Munster experienced the greatest drop in land values throughout 2016.

The fall in commodity prices, especially in the dairy sector, is cited as one of the primary reasons for the reduction in the demand for land in Munster last year. Prices in the other provinces remained relatively steady, with modest increases recorded in Leinster for non-residential holdings while Connacht/Ulster experienced price increases across all categories.

Now in its fourth year, this report gives a comprehensive breakdown of land sales across each province, with respect to farm size and to the presence of a residence. It’s obvious that the price gap is narrowing between farms with a residence and those without . Similarly, smaller parcels continue to command the most demand, which is clearly reflected in the higher prices paid for farms comprising 50 acres or less in all regions.

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Munster

At 20%, the greatest price decrease was experienced in Munster for farms comprising 100 acres or more and with a residence which averaged €9,154/acre. This compares to €11,396/acre for the same type of property in 2015. In fact, all categories in Munster experienced percentage falls.

The average price paid for a 50- to 100-acre farm with a residence was down 10% to €9,092/acre, while smaller residential holdings of up to 50 acres fell by 4% to €10,622/acre. A similar trend was seen for non-residential farms, with drops of 9%, 11% and 3% recorded for farms ranging from 100 acres plus, 50 to 100 acres and up to 50 acres, respectively (see table one).

Leinster

The market performed better in Leinster (excluding Dublin) with percentage increases recorded for all non-residential farm sizes in 2016. The average price paid for a 100-acre non-residential farm was €9,518/acre – up 2% from €9,316/acre in 2015.

Staying with non-residential units, 50- to 100-acre farms in Leinster averaged €10,391/acre (up from €10,242/acre), while farms up to 50 acres in size averaged €11,204/acre (up 6% from €10,608/acre in 2015).

In contrast, there were modest falls (1% to 3%) in the average price for all residential holdings across Leinster last year. The most expensive residential farms were the smaller parcels of up to 50 acres which averaged €12,666/acre, followed by the 50- to 100-acre holdings which averaged €10,988/acre, with the bigger properties of 100 acres plus averaging €10,043/acre.

Connacht/Ulster

The trend in Connacht/Ulster was much more favourable, with increases recorded across all categories for 2016.

The greatest increase at 12% was recorded for residential holdings of up to 50 acres which averaged €6,556/acre (up from €5,839/acre in 2015). The 50- to 100-acre residential category averaged €5,779/acre (up 1%), while the equivalent figure for a 100-acre plus farm was €5,457/acre (up 2%).

Non-residential farms across the region ranged from €5,529/acre for 100 acres or more (up 5%) to €6,375/acre for up to 50 acres (up 3%). Despite the upward trend in the land market in Connacht/Ulster last year, it is worth noting that average land prices in the region still remain below the average in Munster and Leinster. A surge in the demand for forestry-type land is one of the reasons suggested for the rise in average land values in the region last year as some of the better-quality agricultural land has been taken out of circulation. This land is being snapped up by private individuals and investment forestry groups who are willing to pay top dollar for the right product.

Land rental market

The increase in the uptake of long-term leasing over the past couple of years has resulted in a decline in the number of conacre letting arrangements across some regions of the country, in particular in Leinster, according to the latest SCSI/Teagasc report.

In 2016, rental prices for grazing increased by 7% to 9% in Leinster but remained more or less unchanged in Munster and Connacht/Ulster. Average rental prices for cereals rose by 3% in Leinster to €195/acre. In Munster they increased by 6% to €209/acre but fell by 16% in Connacht/Ulster to €110/acre. The average price paid for potato ground ranged from €336/acre in Leinster to €197/acre in Connacht/Ulster (see table two).

The report suggests that the rise in long-term leasing is leading to a tightening in the land rental market in Leinster as less land is made available for conacre each year. However, this pattern is less apparent in Munster and Connacht/Ulster where the rise in long-term leasing arrangements does not currently appear to be driving a decline in the land area that is available for conacre.

Outlook

Looking ahead, the report suggests that milk prices will rise by 20%, beef prices will fall by 10% to 12%, cereals prices will increase by 8% and the price of lambs will be back by 5%. Brexit, CAP reform, future trade agreements between the EU and other exporting countries, along with EU climate change policy, all have the potential to influence farmers’ future incomes and ultimately the demand for land.

Almost 50% of the agents surveyed for this report expect an increase in the demand for land from dairy farmers in 2017 as the price of milk is expected to recover to 2014 levels. However, over 40% of those surveyed across the country don’t anticipate any rise in agricultural land values during 2017, forecasting instead a steady market.