In the aftermath of Ireland’s economic crash, the land market underwent a major correction during 2009 and 2010 as the average price of land more than halved. Since 2011, when prices finally stabilised, the market performance has been relatively steady year on year.

Last year proved to be another steady year for the land market. The 2014 Irish Farmers Journal Land Price Report can exclusively reveal that the average price paid for land in 2014 was €9,890/acre across the 26 counties, a 5.2% increase on the 2013 average of €9,400/acre.

On top of this, the supply of land offered for sale has improved consistently since 2010, when we recorded 41,339 acres offered for sale compared with the 86,408 acres last year.

Based on this, it is evident that the land market in Ireland is in a relatively healthy position at present, which should be reassuring for landowners and selling agents alike.

Farmers more than anyone know the difficulties that come with price volatility and a stable land market is certainly welcome. In 2014 alone, the price of beef and grain was back on previous years, while at the tail end of the year the outlook for milk commodities was increasingly negative.

In an industry where we can see big swings in output prices, it is reassuring that the value of an Irish farmer’s core land asset will remain relatively stable, unlike in other parts of the world.

A record year for supply

The supply of land offered for sale in Ireland last year jumped by 15.4%, with 86,408 acres brought to the market. This makes 2014 a record year for the amount of land offered for sale since the inception of the Irish Farmers Journal Land Price Report eight years ago.

Of the 1,850 farms, incorporating 86,408 acres, offered for sale last year, a total of 826 transactions were completed. These transactions amount to 38,149 acres sold, which represents 44.1% of the 86,408 acres offered for sale. Agents up and down the country certainly felt the effect of the increased supply, with the majority reported to be enjoying their busiest 12 months in years.

Although the supply of land increased significantly, many agents still reported a shortage of good-quality holdings coming to the market and that it was more difficult to sell heavy and average-type land than in other years.

One agent in the south of the country claimed that farmers in his area have no interest in buying poor land anymore. He added that farmers are focusing on the potential productivity of the ground and they are willing to pay a premium for the best-quality land on the rare occasion it’s brought to the market in their area.

It is difficult to gauge the reasons behind the record supply of land brought to the market in 2014. It is equally difficult to explain the reasons behind peoples’ decision to sell. This is especially true in a year of significant change in the Common Agricultural Policy.

In my view, many landowners who may have been thinking of selling land over the last number of years but were uncertain, finally decided to take the plunge in 2014 for a number of reasons.

Since the economic collapse, agriculture has rediscovered its importance at the heart of Ireland’s economy. With the sector currently in expansion mode, confidence in Irish agriculture has never been higher with regard to future potential, making it a good time to sell land.

One key factor was undoubtedly the good weather the country enjoyed for much of 2014. In 2013, the weather had a significant impact on the land market as the extended cold snap at the beginning of the year led to a fodder crisis around Ireland.

The opposite proved to be the case last year as the country received an extended spell of favourable weather that lasted well into a mild October and November, making 2014 a record year for grass growth.

Farms up and down the country looked in great shape and many owners made the big decision to put them on the market.

Another factor which may have influenced many landowners to sell, was the imminent abolition of milk quotas. ‘Dairy’ and ‘expansion’ were certainly the buzzwords among agents last year, as many dairy farmers prepared to increase their milk production in the post-quota era.

Agents operating in prominent dairying locations reported many farmers actively looking for land to expand their grazing platform, especially for compact parcels between 20 and 40 acres in a convenient location.

As a result of this, many landowners put up land for sale in the belief it would sell and make a good price, particularly if the selling agent could get a number of dairy farmers interested in the property.

A steady market

The increased availability of land for sale certainly didn’t dampen the average price achieved nationally, which grew by a healthy 5.2% over the course of the year to €9,890/acre. This year’s average price was calculated based on 826 completed transactions, a record number of sales.

Our analysis estimates that the total value of land sales in the country was just under €395m.

This highlights the incredible level of economic activity occurring within the agricultural sector right now, particularly as the majority of the land transferred was solely for agricultural purposes.

While some farmers are obviously divesting their property, there is a large number of farmers clearly investing in their businesses for the long term.

A significant sum of money like €395m also highlights the importance of access to credit for farmers, especially during a period when the sector is in expansion mode.

Market confidence

The confidence in the land market is certainly back, likely underpinned by the economic stability of the country as a whole and the continuing expansion within Irish agriculture.

Land is a very safe and solid investment and agents all around the country reported packed auction rooms throughout the year, but at present the primary buyers of land are still farmers.

There is a significant number of cash buyers in the market, particularly those with CPO money, in areas like Wicklow and Wexford.

While always a problem for some, finance does appear to be less of an issue than in other years. Banks are open for business and it has been very noticeable how much of their attention is now focused on farmers.

As the Irish economy has recovered in recent years, our lending institutions have zeroed in on the agricultural sector and are looking to do business as the industry continues to expand.

Many new entrant dairy farmers drew down loans over the year, when they snapped up farms offered for sale to give themselves a land platform from which to build their business.

However, the majority of Irish farmers have low debt levels, instead preferring to deploy cashflow from their farm business into land purchases.

Farmers with shares in Kerry Group and Glanbia may also have cashed in on these assets in order to finance land purchases during the year.

The diversification of Kerry Group into the flavours and ingredients business and Glanbia into the performance nutrition category has had a tremendous impact on the value of shares in each company, thereby generating significant wealth for some farmers.

Agents in Kerry reported that a number of farmers had divested their shareholdings during the year to buy land, especially for good-quality holdings, which are rarely brought to the market in the county.

Improvement in housing market

One of the most notable findings from this year’s analysis is the significant widening of the gap between the average price achieved for residential properties and non-residential properties. In previous years, there was minimal difference between the average price of residential and non-residential farms, reflecting the weakness of the housing market in the country.

However, this trend appears to have arrested in 2014 as residential farms sold for an average of €11,424/acre compared with an average of €9,308/acre for farms without a residence.

In other years, a farm including a residence proved more of a hindrance when selling a property as many farmers were only looking for the land and didn’t want the hassle of maintaining a residence.

Last year, however, the market saw the return of the buyer looking for a house along with a small holding of land. Another influence on the market, especially in the latter half of the year, were buyers from the UK.

Selling agents, particularly in the west and southwest of the country, reported a major increase in enquiries from UK investors, both from returning emigrants and UK natives, trying to secure properties here.

With the euro falling to a six-year low against sterling in the latter part of 2014, Irish property has become extremely attractive to UK buyers. The most sought after properties are residential holdings in a rural location with an acre or more.

Rural properties in the UK cost an average of €67,000 more than urban properties, the opposite of the situation here in Ireland. With many UK buyers priced out of rural properties in their own country, they are now looking to the Irish market, a trend that is likely to continue throughout 2015.

Another significant feature of the land market in 2014 was the return of the speculator, with some huge prices paid for agricultural land located on the outskirts of towns and villages around the country that may have future development potential.

This was certainly the case in Dublin last year, where the average price of land skyrocketed by 48.5% to €23,496/acre. The current housing shortage in Dublin has been well documented throughout the year and it appears to have influenced the land market in the county, with a number of farms situated close to commuter regions selling for inflated prices. One tillage farm in Dublin that was valued by an auctioneer at €20,000/acre ended up selling for close to €50,000/acre.

While cases like this were obviously the exception, it is important to note that investors are once again buying land in certain areas with an eye on future development. The construction industry in Ireland almost came to a halt during the recession, but it has lately shown signs of finding its feet again.

Even if the investor has no intention of developing the land themselves, they may view the investment as a safe haven to park money, especially when the property is located so close to an urban centre.

In areas such as this, the value of land has the potential to significantly increase in the coming years.

One man who had no hesitation investing his money in Irish property last year was US businessman John Malone. In the past three years, Malone has spent more than €200m on property in Ireland, buying up hotels, derelict rural mansions and highly developed stud farms. Last year alone, he snapped up the magnificent Castlemartin Estate in Kildare, along with Ballylinch Stud in Kilkenny.

Malone, who is chairman of the communications giant Liberty Media, has always been a significant investor in land. With more than 2.2m acres of ranch land and forestry, he recently surpassed billionaire Ted Turner as the largest private landowner in the US.

Malone will be one to watch in the coming years, to see if he further expands his property portfolio in Ireland.

Big blocks achieving less

In 2013, agents reported a strong demand from eager cash buyers for large blocks of land between 100 and 300 acres. This claim was certainly backed up in the analysis that year as large farms greater than 100 acres in size achieved the strongest price per acre compared with holdings of 40 to 99 acres and less than 40 acres in size.

However, the demand for large holdings appears to have softened somewhat in 2014, with much stronger competition for farms less than 100 acres.

The average price paid for farms greater than 100 acres in size was €9,680/acre in 2014 – a 6.7% decrease on the 2013 average of €10,377/acre. On the other hand, farms less than 100 acres in size experienced an improvement in the average price achieved.

Farms between 40 and 99 acres in size made an average of €9,491/acre, which represents a 6.7% increase from the €8,897/acre average in 2013.

The average price paid for farms less than 40 acres in size stood at €10,071/acre, reflecting a 6.1% increase on the €9,490/acre average in 2013. Agents report that bare land suitable for planting in forestry was strongly sought after throughout the year. Like any parcel of land, prices will depend on location, size, ease of access and the type of plantation. Last year, prices typically ranged from €1,500/acre to highs of €4,000/acre or more for exceptional blocks.

Provinces

Of the four provinces, Leinster led the way once again in terms of the amount of land offered for sale and the average price achieved. A total of 35,028 acres were brought to the market in Leinster, achieving an average price of €12,402/acre – a 13% increase on the 2013 average of €10,973/acre.

In Munster, a total of 31,042 acres were offered for sale on the open market. The average price paid for land stood at €9,836/acre, representing a 5.3% growth in price. Average prices were back by 6.9% in Connacht to €5,886/acre, with a total of 13,819 acres offered for sale.

In Ulster, which includes Cavan, Monaghan and Donegal, the average price paid for land was €7,644/acre, a 1.1% decrease on the 2013 average of €7,729/acre. A total of 6,518 acres were offered for sale in Ulster during 2014.

Looking forward

Future indications for the land market in Ireland look positive, especially as the agricultural sector as a whole continues to expand. The year 2015 is already off to an extremely busy start, with a raft of new farms offered for sale by private treaty and public auction in the first two months of the year.

Indications from the results of a number of public auctions that took place already suggest that prices are in line, or even slightly ahead, of last year. Speaking with agents in January, many had a sense of caution about the market, particularly at a time when the outlook for dairy commodities was negative and dairy farmers were being warned to expect weak prices for milk throughout 2015.

However, since February, global dairy market sentiment and prices have improved significantly on the back of a reduced milk supply in Europe and New Zealand. This improvement, coupled with a renewed confidence in the beef sector, appears to be underpinning a bedrock of confidence in the land market at present.

Even during last year as the downturn in the beef trade rumbled from month to month without any improvement in sight, activity in the land market continued, with some strong prices achieved.

Many will argue that the market was being driven by dairy farmers, but there were plenty of instances of beef farmers paying good prices for land last year.

As one agent described it, many farmers will still go out of their way to acquire land when it comes up beside them, especially when it’s a good-quality holding, which may never come on the market again in their lifetime.

Added to this, farmers’ access to finance has improved, with a much greater focus on lending to the agricultural sector from financial institutions.

Weather remains a variable that no one can predict and has a greater impact on the agricultural sector than anywhere else.

Adverse weather conditions can have a significant bearing on the land market, as seen in 2013 when the fodder crisis brought horrendous stress to a lot of farmers and buying land was the last thing on their minds.

What will be interesting to monitor in the coming years is the effect the recent tax changes around land ownership and land leasing will have on the land market as a whole. The clear aim of the Government with the changes outlined in Budget 2014 is to encourage a greater uptake of the long-term leasing option between farmers, instead of conacre arrangements which have been more favoured up until now.

While the uptake of long-term leases has been sluggish in some parts of the country, it is an arrangement likely to increase in time, as more landowners seek to avail of the tax incentives they bring.

If more farmers, particularly dairy farmers, are able to get their hands on a decent block of land they can work with for a minimum of five years, it may have the effect of drawing many farmers who were actively looking to buy land away from the market.

That said, when good land comes up for sale nearby, farmers have always shown a desire to acquire it given the rarity of the opportunity.

Also, from speaking to many agents over the year, selling marginal or poor land is proving a far greater challenge than ever.

Farmers are increasingly aware of the need for productivity and efficiency inside the farmgate.

More farmers are willing to pay a premium for the best-quality holdings now, rather than settling for a marginal piece of land that will lag efficiency.