The agricultural land market over the past 10 years has gone from boom to bust to recovery. Prices collapsed within two years, going from €20,200/acre in 2007 to €10,200/acre by 2009. Since then, the market has been desperately trying to correct itself and find a new level. This correction has required huge adjustment by all involved in the property market but none more so than by the sellers. After the recession hit, it was a major challenge for agents to get sellers to come around to the fact that the value of their property had halved in two years because expectations still remained extremely high.
Following this, the market experienced a lot of turbulence and some particularly challenging moments. However, in comparison with the housing market, there was always movement in the agricultural land market, albeit at a much reduced level. Supply dropped to an all-time low in 2010, with just 41,000 acres brought to the market, but this gained a lot of momentum over the next two years and had returned to normal levels by 2013 at 74,800 acres. In contrast, average prices continued to fall to a low of €8,700/acre in 2010 and, in the main, have failed to gain any major ground due to annual fluctuations, since the collapse of 2009.
So, after six years of market correction, have we reached equilibrium? The 2015 Irish Farmers Journal Land Price Report can exclusively reveal that the average price paid for land across the 26 counties was €8,914/acre, a 9.8% decrease on the 2014 average of €9,890/acre. This is the sixth year in a row that the national average has failed to surpass the €10,000/acre mark, which could suggest that this new price level may be here to stay for some time. It is clear the market is not immune from volatility and the fundamental elements that influence affordability are very much alive.
For many, the national average for 2015 may come as a surprise, as auctions appeared to be performing relatively well and enquiries were plentiful throughout the year. However, the euphoria that surrounded the abolition of milk quotas throughout 2014 and right up to the end of March 2015 gradually faded as reality began to kick in, particularly in the second half of last year. Dairy farmers, who were key customers for land in 2013 and 2014, saw a sharp drop in the price of milk as 2015 progressed.
Over the past 18 months, the average price of milk has fallen by 30%, which has clearly diminished cashflow on many farms. Farmers who may have considered purchasing land at the start of 2015, soon diverted the focus to concentrate solely on the efficiency of their farm business and not on further investment in land. It’s clear that the drop in milk price coupled with the major investment in infrastructure and farm buildings on many farms around the country has put the possibility of buying land further down the priority agenda, for the short to medium term at least.
In 2014, dairy farmers were notably active buying up 30-acre to 50-acre blocks, which they used as outfarms for the harvesting of silage and the grazing of followers. They were still active in 2015, but perhaps to a lesser extent. Beef farmers also experienced notable price fluctuations throughout 2015, which ultimately affected the purse strings. Tillage farmers have endured a stagnant market where prices have remained on the floor for the past three years. However, despite the challenges associated with commodity prices, the demand from farmers for land still remains strong and many will go that extra mile to secure neighbouring land.
The biggest challenge for many is securing funding. A significant number of agents around the country report that the stringent conditions associated with drawing down a loan has impeded farmers from buying land, despite been granted approval by the lending institutions. The agents suggest that this hardening attitude towards lending was particularly evident in the backend of the year. Such is the seriousness of the issue that some solicitors are advising their clients not to pursue the purchase of land via the auction route. In the event of not being able to draw down their loan, a person will lose their 10% deposit if they can’t come up with the remaining funds at the close of sale.
Consequently, some agents are toying with the idea of going completely down the private treaty route in 2016. This will give prospective buyers a longer time frame to get their finances in order without the worry of losing their deposit.
It was interesting to learn that a number of agents across the country believe that development or Compulsory Purchase Order (CPO) money has dried up. These money reserves were instrumental in securing a successful sale over the past six years and helped maintain a certain level of movement in farm sales during very difficult times. The evaporation of these money reserves over time is likely to affect the market because, up to now, a substantial portion of purchases were made by cash buyers who didn’t have to resort to the intricacies of borrowing to secure funds.
Surge in equestrian interest
Unless land is located in a progressive farming area with at least two competitive farmers in the vicinity and preferably living beside it, a sale may not always be guaranteed. Marginal land in an active farming area can make more than top-class land in an isolated region. Local buyers and in particular dairy producers or a couple of sizeable tillage farmers, are critical. Farmers form the backbone of the land market in this country and are by far the dominant buyers
But apart from the local dimension, there was a notable level of activity from sterling customers, particularly in the first half of the year. A number of large farms comprising 100 acres or more in Meath, Cavan, Westmeath, Leitrim and north Kildare, were actively bid on, if not secured, by Northern customers. The strength of sterling proved extremely favourable but as the year progressed, the presence of sterling buyers actually began to dwindle.
The return of the non-farming buyer became more apparent in 2015. In my view, equestrian and business interest surged last year. Those with equine interests became major players for land in certain regions last year, so much so that they actually outbid dairy farmers. These buyers were looking for big sprawling estates that are well located, have lots of character and offer scale and potential.
I am aware of at least 10 large estates/farms that were secured by those involved in the equine industry last year. Some of these made €10,000 to €12,000/acre, others fetched over €20,000/acre. It’s clear that the equine buyer is still looking for value but if pushed, is prepared to pay top dollar too.
To a lesser extent, business people with farming backgrounds and working professionals eager to acquire a piece of land in the country were also among the buyer mix last year. Expats from the UK, Australia, Canada and New Zealand who want to return home, also expressed active interest. British people thinking of downsizing and who would have to compete with an escalating market in the UK, turned to Ireland to buy a cottage on a few acres in the countryside. Indeed, some agents in the west report that this market is buzzing at the moment.
The strength of the dollar saw a number of Americans, who have no affiliation to Ireland, express active interest in the big country house estate on 100 or more acres.
Supply down by 13.6%
Apart from average prices, the supply of land to the market also fell pretty dramatically last year. According to our analysis, 74,629 acres were offered for sale in 2015 – down 13.6% from 86,408 acres in 2014. It’s clear the gain that was achieved in 2014 (supply increased by 15.4%) was quickly diminished in 2015, bringing supply back to 2013 levels when 74,862 acres were offered for sale.
It’s difficult to gauge the reasons why the supply of land to the market fell last year. Since the introduction of the new CAP regime, there has been a notable increase in the number of long-term lease arrangements, particularly in the past 12 months. Farmers who regularly rent land were eager to enter long-term agreements for a minimum period of at least five years. This would enable them to plan ahead for the duration of the current regime, which lasts until 2019.
For landowners, the attractive tax relief was a major incentive to enter a long-term arrangement. On top of this, the market for rented land was buzzing last year, which possibly captured the imaginations of those who were on the verge of contemplating selling their land and instead let it on a long-term lease.
It’s possible that this trend will continue into 2016 as the current buoyancy in the conacre and land leasing market is making the option to lease very attractive to the landowner. Long-term leasing has the subtle effect of tying up land for a long number of years that otherwise might be brought to the open market in any given year.
The introduction of the new CAP regime in 2015 probably deterred some landowners from going to the market given the uncertainty associated with both the acquisition and the disposal of entitlements. Now that we are almost 12 months in the new system, these landowners might be more confident to take the plunge and go to the market this year.
In my view, in preparation for the abolition of milk quotas and the introduction of the new CAP regime, a significant number of farmers either bought land in 2014 or entered a long-term lease agreement early last year in a bid to fulfil their requirements for the next five years. As a result, these farmers had no major interest in buying more land last year or were not in a financial position to acquire more land.
Since the recession, the primary reasons for selling were executors’ sales, receiver sales and pressure sales. Executors’ sales have, and always will be, a feature of the land market in this country. These sales are generally brought to the auction room and can set a transparent benchmark for the price of land in certain areas, as they nearly always sell under the hammer.
In my view, there was a reduction in the number of receiver/pressure sales last year. Since 2010, NAMA/receiver sales became a prominent component of the agricultural land market. In many cases, these properties were owned by a syndicate or a company that had no sentimental attachment to the property, making the sale very straightforward. The properties involved could range from a 300-acre estate to a well-located 20-acre field on the outskirts of a town. The recovery in the economy, coupled with the favourable growth in GDP over the next number of years, is likely to further reduce the number of receiver sales brought to the open market.
Steady market
Despite the fall in both average prices and supply last year, the agricultural land market remains steady. While there are fluctuations within and across regions, the level of activity is still strong. Land is selling and plenty of deals are getting across the line.
A number of agents told me that last year was their best year yet since the recession; others will admit that 2014 was a better year. In any given year, the land market is a function of the amount of land offered for sale, the quality of the land on offer, and the depth of pockets of the prospective buyer, which in the main, will be a local farmer. Given these three components, regional variations in the level of activity and in average prices are inevitable.
In my view, the fundamentals of
affordability became particularly evident last year. Unlike the boom years, the primary buyers of land today are farmers. Consequently, anything that affects their level of income is likely to affect the demand and price of land.
It’s clear that the fall in milk prices, the volatile beef market and the stagnant grain market gradually dampened the mood of farmers, particularly in the latter half of 2015. As the year progressed there were subtle signs that the market was beginning to soften and in some cases, it got more difficult to move land. This may not have been evident in certain parts of Munster and Leinster, but it was emerging in the Midlands and further west.
Despite this, 2015 kicked off on a buoyant note. Land arrived on the market in early February with a flush of properties offered for sale throughout March, April, May and June. Among these were some notably sizeable holdings such as 408 acres near Dysart, Co Westmeath; 177 acres near Gowran, Co Kilkenny; a 223-acre estate at Ravensdale, Lexlip, Co Kildare; 263 acres at Markree Demesne, Co Sligo, and 207 acres at Carriglea Farm, Dungarvan, Co Waterford.
This flush continued right into July, with a slight easing in August. The momentum kicked off again in September and more or less finished up quite abruptly by the middle of November. In contrast, the autumn of 2014 almost continued right up to Christmas.
Big properties are not new, but one of the notable aspects of the market last year was that there were plenty of cash buyers for them, particularly in the spring. Of the 45 farms comprising 100 acres or more that went for auction last year, almost 30 sold under the hammer. A further 10 were either fully or partially sold after auction, which would indicate that there was a healthy appetite for big holdings last year and furthermore, it was backed up by plenty of purchasing power.
Big quality farms are always in demand, but in some counties they don’t arrive on the market frequently. However, many agents, particularly in the west of the country, report that smaller blocks are easier to sell because they are more affordable to a broader range of customers.
Development land
Well-located land parcels close to towns or villages with hope value (but not zoned) are beginning to make notably more than agricultural value in some areas. This is not true for every well-located parcel – a lot depends on the services and infrastructure in the surrounding town or area to meet the demands of a potential building project.
Over the past 12 months, however, zoned land has started to command a serious premium, driven by the return of the developer. Some good examples were seen in Co Wexford, where a 10-acre zoned parcel at Clonard on the outskirts of Wexford town sold for €26,000/acre; a 38-acre block of land with planning for 50 houses at Ard na Slaine, Newtown Road, Wexford town made €1.625 million or €42,700/acre, and a 46.25-acre fragmented partly zoned parcel on the outskirts of Gorey sold in lots for a combined total of €1.905m or almost €42,000/acre.
In Dublin, 16.5 acres near Blakescross, Swords, that had planning for an agribusiness estate sold for €43,000/acre while a 16-acre parcel outside Dunshaughlin that was zoned residential made €58,100/acre. It’s clear that zoned land in the greater Dublin area is coming back into fashion again. However, where land has been de-zoned and deemed agricultural again, a premium is not available.
Just a couple of years ago these types of properties were only making agricultural value or slightly more at €10,000 to €15,000/acre. It’s clear that the rise in national house prices is injecting a level of confidence that justifies the cost of building to the developer again.
Sites were a segment of the market which completely dried up during the recession. Agents report that they are now beginning to move again and fetch reasonably good money.
Forestry land
The demand for land suitable for planting is phenomenal. This area of the market that has gained a lot of ground since the changes to the Afforestation Grant and Premium Scheme in 2014, with tremendous interest now stemming from the non-farming community. Agents report that they can’t get enough of suitable ground to meet the growing demand from business people, pension groups, UK companies, wind energy consortiums and farmers themselves.
Big blocks comprising 50 acres and more and with good access are most sought-after but they must meet planting approval. Such is the demand for bare ground that some buyers are willing to pay between €4,000 to €4,900/acre, which is clearly putting a floor on marginal quality land in certain areas of the country.
Looking ahead
Given the outlook for milk, beef, and tillage, it would be difficult to envisage anything dramatic happening in the agricultural land market throughout 2016. Access to funding appears to be the single barrier to land purchase for many farmers and is something that could adversely affect the market, particularly if banks continue to tighten the lending strings and cash reserves begin to dry up in certain regions.
A number of agents report that they have a plentiful supply of land on their books for this spring. Demand still remains strong in many regions, particularly from young farmers, with additional interest emanating from business people, working professionals and the equine industry. Depending on the strength of sterling, there is also the possibility of Northern and UK-based spending power in the auction room again this spring.
The lull in the backend of 2015 is viewed by agents as temporary and many expect the market to continue at a steady pace again this year.
The 2015 Irish Farmers Journal Land Price Report reveals that the average price paid for land across the 26 counties was €8,914/acre, representing a 9.9% decrease on the 2014 average of €9,890/acre. Since prices halved to €10,200/acre back in 2009, the average price of land in Ireland has struggled to make up ground over the past number of years. This is the sixth year in a row that the national average has failed to break the €10,000/acre barrier and clearly indicates that the land market continues to be subject to regional volatility. The IFJ report is based on 1,654 farms/land parcels brought to the market, which equates to 74,629 acres offered for sale by private treaty, public auction and tender. The national average of €8,914/acre is based on 846 completed sales cross the 26 counties.
Land supply
The amount of land brought to the market last year decreased by 13.6% to 74,629 acres compared with 86,408 acres in 2014. This is the first decrease in supply since the low of 41,300 acres in 2010. 1,654 farms/land parcels were offered for sale nationally – this is down from 1,850 farms in 2014Cork topped the table with the most land offered for sale at 7,458 acres followed by Tipperary at 5,869 acres, Wicklow at 5,510 acres, Roscommon at 5,133 acres and Galway at 4,552 acres. Louth had the least amount of land at 424 acres offered, followed by Dublin at 786 acres, Leitrim at 842 acres, Donegal at 976 acres and Carlow at 1,117 acres. Given the 13.6% fall in the supply of land nationally, it’s not surprising that the volume of land offered for sale fell in 22 counties. Louth experienced the biggest drop – down by a massive 62% followed by Donegal at 48.9%, Dublin at 46.3%, Kilkenny at 37.6% and Longford at 33.7%. Just four counties recorded an increase in supply. Wicklow had the biggest increase at 45.7% followed by Tipperary at 18.7%, with mild increases in Galway and Roscommon, each at 1.1%. Leinster had the most land offered for sale at 30,495 acres followed by Munster at 26,011 acres, Connacht at 13,113 acres and Ulster at 5,010 acres. When compared with 2014, all four provinces recorded a decrease in land supply. Average prices
The national average price paid for land in 2015 was €8,914/acre. This represents a 9.9% decrease on the 2014 average of €9,890/acre. The average price of land increased in 12 counties, with the biggest increase recorded in Sligo at 22.1%, followed by Leitrim at 20.3%, Galway at 11.9% and Donegal at 7.3%. Only three counties experienced price increases greater than 10%.Average values decreased in 14 counties, with the greatest reduction seen in Wicklow at 48.5% followed by Dublin at 41.5%, Clare at 33.1%, Louth at 26.7% and Kilkenny at 26.6%. Eleven counties recorded an average of €10,000/acre or more (compared with 12 in 2014). Ten counties also had an average price of €8,000/acre or less (compared with nine in 2014). Kildare recorded the highest average price at €13,886/acre followed by Dublin closely behind at €13,736/acre, Meath at €11,861/acre, Wexford at €11,214/acre and Kilkenny at €10,883/acre. Leitrim had the lowest average at €4,869/acre followed by Clare at €5,391/acre, Mayo at €5,699/acre, Roscommon at €5,801/acre and Sligo at €6,089/acre. Leinster recorded the highest average at €10,271/acre followed by Munster at €9,190/acre, Ulster at €8,093/acre and Connacht at €6,183/acre. Residential versus non-residential
There were more residential farms offered for sale in 2015 at 33.6% (up from 27.5% in 2014) while 66.4% were non-residential.The price difference between residential and non-residential farms severely narrowed in 2015. The average price for residential farms was €9,591/acre – down 16% on 2014 when the residential average was €11,424/acre. The average price paid for non-residential farms was €8,649/acre – down 7% on 2014 when the non-residential average was €9,308/acre. Method of sale
Of the 1,654 farms that went to the market last year, 1,147 (69.3%) were offered for sale by private treaty, which clearly indicates it continues to be the dominant method of land sale. Public auction accounted for 30.4% of the total land offered, while tender accounted for just 0.3%. Properties that sold under the hammer made more than those sold by private treaty. Farms sold at auction averaged €10,244/acre while those that sold by private treaty averaged €8,413/acre. The success rate at auction made a significant recovery last year following a major fall in 2014. In 2015, 48% of farms that went to auction successfully sold under the hammer, while 52% were withdrawn (similar to 2013). This compares with a success rate of just 38% in 2014 and a withdrawal rate of 62%. Auction is the preferred route in some counties, while private treaty is more prevalent in others. Meath had the highest number of farms brought to auction at 53, followed by Wexford at 39, Westmeath at 38 and Wicklow at 36. Not surprisingly, Cork had the highest number of farms offered for sale by private treaty at 156, followed by Roscommon at 107, Galway at 86 and Tipperary at 73 farms. Just five farms were offered for sale by tender – a process which is not that common in this country, at least in the sale of farmland.Farm size
Small parcels continued to dominate the market in 2015, with 62.6% of holdings comprising less than 40 acres. Farms 40 to 99 acres accounted for 29.4% of the market while those ranging from 100 to 199 acres made up just 6.5%. Farms greater than 200 acres accounted for only 1.6% of the market. Smaller lots generated a slightly better price than big holdings. The average price paid for farms less than 40 acres was €8,974/acre - almost identical to that paid for properties ranging in size from 40 to 99 acres, which averaged €8,977/acre. Blocks comprising 100 acres or more made a bit less, at an average price of €8,118/acre. Cork had the greatest number of big holdings (greater than 100 acres) for sale at 15 followed by Wicklow at 12, Roscommon and Tipperary both at 10 and Galway at nine. Cork also had the greatest number of small holdings (less than 40 acres) at 105 properties followed by Roscommon at 88, Galway at 72 and Limerick and Meath at 60 each. Completed sales
The 2015 national average of €8,914/acre is based on 846 completed sales sold by private treaty and public auction. These transactions amount to 35,959 acres recorded as sold, which represents 48.2% of the 74,629 acres offered for sale. This is the highest number of successful transactions recorded since the first Irish Farmers Journal Land Price Report nine years ago. Of the 846 completed sales, 482 were private treaty results which were critical in order to obtain a comprehensive overview of the Irish land market. Public auction accounted for 229 transactions. A further 134 farms that were withdrawn at auction sold afterwards in a private deal. Leinster had the most land sold at 16,250 acres followed by Munster at 11,141 acres, Connacht at 5,735 acres and Ulster at 2,834 acres. In terms of most sales recorded, Cork topped the table at 77, followed by Roscommon at 61, Cavan at 52, Limerick at 50, and Tipperary and Meath at 48 sales. Louth had the least amount of sales at 10 closely followed by Dublin at 11, Waterford at 14 and Mayo and Leitrim both at 18 sales. Value of sales
The total value of land sales last year was just under €316 million, with almost 36,000 acres recorded as sold. Notwithstanding the fact that there was almost 12,000 fewer acres offered for sale last year, the value of sales is back from €395m in
2014 when 38,100 acres were recorded as sold. This gives a clear indication of just how important land sales are to the general economy and in particular to the rural community. A comprehensive breakdown of agricultural land prices in each county and is available exclusively inside the Irish Farmers Journal newspaper from Thursday 10 March 2016, as well as online for digital paid subscribers at www.farmersjournal.ie. Don't miss this FREE 72-page guide to agricultural land prices across Ireland!
The agricultural land market over the past 10 years has gone from boom to bust to recovery. Prices collapsed within two years, going from €20,200/acre in 2007 to €10,200/acre by 2009. Since then, the market has been desperately trying to correct itself and find a new level. This correction has required huge adjustment by all involved in the property market but none more so than by the sellers. After the recession hit, it was a major challenge for agents to get sellers to come around to the fact that the value of their property had halved in two years because expectations still remained extremely high.
Following this, the market experienced a lot of turbulence and some particularly challenging moments. However, in comparison with the housing market, there was always movement in the agricultural land market, albeit at a much reduced level. Supply dropped to an all-time low in 2010, with just 41,000 acres brought to the market, but this gained a lot of momentum over the next two years and had returned to normal levels by 2013 at 74,800 acres. In contrast, average prices continued to fall to a low of €8,700/acre in 2010 and, in the main, have failed to gain any major ground due to annual fluctuations, since the collapse of 2009.
So, after six years of market correction, have we reached equilibrium? The 2015 Irish Farmers Journal Land Price Report can exclusively reveal that the average price paid for land across the 26 counties was €8,914/acre, a 9.8% decrease on the 2014 average of €9,890/acre. This is the sixth year in a row that the national average has failed to surpass the €10,000/acre mark, which could suggest that this new price level may be here to stay for some time. It is clear the market is not immune from volatility and the fundamental elements that influence affordability are very much alive.
For many, the national average for 2015 may come as a surprise, as auctions appeared to be performing relatively well and enquiries were plentiful throughout the year. However, the euphoria that surrounded the abolition of milk quotas throughout 2014 and right up to the end of March 2015 gradually faded as reality began to kick in, particularly in the second half of last year. Dairy farmers, who were key customers for land in 2013 and 2014, saw a sharp drop in the price of milk as 2015 progressed.
Over the past 18 months, the average price of milk has fallen by 30%, which has clearly diminished cashflow on many farms. Farmers who may have considered purchasing land at the start of 2015, soon diverted the focus to concentrate solely on the efficiency of their farm business and not on further investment in land. It’s clear that the drop in milk price coupled with the major investment in infrastructure and farm buildings on many farms around the country has put the possibility of buying land further down the priority agenda, for the short to medium term at least.
In 2014, dairy farmers were notably active buying up 30-acre to 50-acre blocks, which they used as outfarms for the harvesting of silage and the grazing of followers. They were still active in 2015, but perhaps to a lesser extent. Beef farmers also experienced notable price fluctuations throughout 2015, which ultimately affected the purse strings. Tillage farmers have endured a stagnant market where prices have remained on the floor for the past three years. However, despite the challenges associated with commodity prices, the demand from farmers for land still remains strong and many will go that extra mile to secure neighbouring land.
The biggest challenge for many is securing funding. A significant number of agents around the country report that the stringent conditions associated with drawing down a loan has impeded farmers from buying land, despite been granted approval by the lending institutions. The agents suggest that this hardening attitude towards lending was particularly evident in the backend of the year. Such is the seriousness of the issue that some solicitors are advising their clients not to pursue the purchase of land via the auction route. In the event of not being able to draw down their loan, a person will lose their 10% deposit if they can’t come up with the remaining funds at the close of sale.
Consequently, some agents are toying with the idea of going completely down the private treaty route in 2016. This will give prospective buyers a longer time frame to get their finances in order without the worry of losing their deposit.
It was interesting to learn that a number of agents across the country believe that development or Compulsory Purchase Order (CPO) money has dried up. These money reserves were instrumental in securing a successful sale over the past six years and helped maintain a certain level of movement in farm sales during very difficult times. The evaporation of these money reserves over time is likely to affect the market because, up to now, a substantial portion of purchases were made by cash buyers who didn’t have to resort to the intricacies of borrowing to secure funds.
Surge in equestrian interest
Unless land is located in a progressive farming area with at least two competitive farmers in the vicinity and preferably living beside it, a sale may not always be guaranteed. Marginal land in an active farming area can make more than top-class land in an isolated region. Local buyers and in particular dairy producers or a couple of sizeable tillage farmers, are critical. Farmers form the backbone of the land market in this country and are by far the dominant buyers
But apart from the local dimension, there was a notable level of activity from sterling customers, particularly in the first half of the year. A number of large farms comprising 100 acres or more in Meath, Cavan, Westmeath, Leitrim and north Kildare, were actively bid on, if not secured, by Northern customers. The strength of sterling proved extremely favourable but as the year progressed, the presence of sterling buyers actually began to dwindle.
The return of the non-farming buyer became more apparent in 2015. In my view, equestrian and business interest surged last year. Those with equine interests became major players for land in certain regions last year, so much so that they actually outbid dairy farmers. These buyers were looking for big sprawling estates that are well located, have lots of character and offer scale and potential.
I am aware of at least 10 large estates/farms that were secured by those involved in the equine industry last year. Some of these made €10,000 to €12,000/acre, others fetched over €20,000/acre. It’s clear that the equine buyer is still looking for value but if pushed, is prepared to pay top dollar too.
To a lesser extent, business people with farming backgrounds and working professionals eager to acquire a piece of land in the country were also among the buyer mix last year. Expats from the UK, Australia, Canada and New Zealand who want to return home, also expressed active interest. British people thinking of downsizing and who would have to compete with an escalating market in the UK, turned to Ireland to buy a cottage on a few acres in the countryside. Indeed, some agents in the west report that this market is buzzing at the moment.
The strength of the dollar saw a number of Americans, who have no affiliation to Ireland, express active interest in the big country house estate on 100 or more acres.
Supply down by 13.6%
Apart from average prices, the supply of land to the market also fell pretty dramatically last year. According to our analysis, 74,629 acres were offered for sale in 2015 – down 13.6% from 86,408 acres in 2014. It’s clear the gain that was achieved in 2014 (supply increased by 15.4%) was quickly diminished in 2015, bringing supply back to 2013 levels when 74,862 acres were offered for sale.
It’s difficult to gauge the reasons why the supply of land to the market fell last year. Since the introduction of the new CAP regime, there has been a notable increase in the number of long-term lease arrangements, particularly in the past 12 months. Farmers who regularly rent land were eager to enter long-term agreements for a minimum period of at least five years. This would enable them to plan ahead for the duration of the current regime, which lasts until 2019.
For landowners, the attractive tax relief was a major incentive to enter a long-term arrangement. On top of this, the market for rented land was buzzing last year, which possibly captured the imaginations of those who were on the verge of contemplating selling their land and instead let it on a long-term lease.
It’s possible that this trend will continue into 2016 as the current buoyancy in the conacre and land leasing market is making the option to lease very attractive to the landowner. Long-term leasing has the subtle effect of tying up land for a long number of years that otherwise might be brought to the open market in any given year.
The introduction of the new CAP regime in 2015 probably deterred some landowners from going to the market given the uncertainty associated with both the acquisition and the disposal of entitlements. Now that we are almost 12 months in the new system, these landowners might be more confident to take the plunge and go to the market this year.
In my view, in preparation for the abolition of milk quotas and the introduction of the new CAP regime, a significant number of farmers either bought land in 2014 or entered a long-term lease agreement early last year in a bid to fulfil their requirements for the next five years. As a result, these farmers had no major interest in buying more land last year or were not in a financial position to acquire more land.
Since the recession, the primary reasons for selling were executors’ sales, receiver sales and pressure sales. Executors’ sales have, and always will be, a feature of the land market in this country. These sales are generally brought to the auction room and can set a transparent benchmark for the price of land in certain areas, as they nearly always sell under the hammer.
In my view, there was a reduction in the number of receiver/pressure sales last year. Since 2010, NAMA/receiver sales became a prominent component of the agricultural land market. In many cases, these properties were owned by a syndicate or a company that had no sentimental attachment to the property, making the sale very straightforward. The properties involved could range from a 300-acre estate to a well-located 20-acre field on the outskirts of a town. The recovery in the economy, coupled with the favourable growth in GDP over the next number of years, is likely to further reduce the number of receiver sales brought to the open market.
Steady market
Despite the fall in both average prices and supply last year, the agricultural land market remains steady. While there are fluctuations within and across regions, the level of activity is still strong. Land is selling and plenty of deals are getting across the line.
A number of agents told me that last year was their best year yet since the recession; others will admit that 2014 was a better year. In any given year, the land market is a function of the amount of land offered for sale, the quality of the land on offer, and the depth of pockets of the prospective buyer, which in the main, will be a local farmer. Given these three components, regional variations in the level of activity and in average prices are inevitable.
In my view, the fundamentals of
affordability became particularly evident last year. Unlike the boom years, the primary buyers of land today are farmers. Consequently, anything that affects their level of income is likely to affect the demand and price of land.
It’s clear that the fall in milk prices, the volatile beef market and the stagnant grain market gradually dampened the mood of farmers, particularly in the latter half of 2015. As the year progressed there were subtle signs that the market was beginning to soften and in some cases, it got more difficult to move land. This may not have been evident in certain parts of Munster and Leinster, but it was emerging in the Midlands and further west.
Despite this, 2015 kicked off on a buoyant note. Land arrived on the market in early February with a flush of properties offered for sale throughout March, April, May and June. Among these were some notably sizeable holdings such as 408 acres near Dysart, Co Westmeath; 177 acres near Gowran, Co Kilkenny; a 223-acre estate at Ravensdale, Lexlip, Co Kildare; 263 acres at Markree Demesne, Co Sligo, and 207 acres at Carriglea Farm, Dungarvan, Co Waterford.
This flush continued right into July, with a slight easing in August. The momentum kicked off again in September and more or less finished up quite abruptly by the middle of November. In contrast, the autumn of 2014 almost continued right up to Christmas.
Big properties are not new, but one of the notable aspects of the market last year was that there were plenty of cash buyers for them, particularly in the spring. Of the 45 farms comprising 100 acres or more that went for auction last year, almost 30 sold under the hammer. A further 10 were either fully or partially sold after auction, which would indicate that there was a healthy appetite for big holdings last year and furthermore, it was backed up by plenty of purchasing power.
Big quality farms are always in demand, but in some counties they don’t arrive on the market frequently. However, many agents, particularly in the west of the country, report that smaller blocks are easier to sell because they are more affordable to a broader range of customers.
Development land
Well-located land parcels close to towns or villages with hope value (but not zoned) are beginning to make notably more than agricultural value in some areas. This is not true for every well-located parcel – a lot depends on the services and infrastructure in the surrounding town or area to meet the demands of a potential building project.
Over the past 12 months, however, zoned land has started to command a serious premium, driven by the return of the developer. Some good examples were seen in Co Wexford, where a 10-acre zoned parcel at Clonard on the outskirts of Wexford town sold for €26,000/acre; a 38-acre block of land with planning for 50 houses at Ard na Slaine, Newtown Road, Wexford town made €1.625 million or €42,700/acre, and a 46.25-acre fragmented partly zoned parcel on the outskirts of Gorey sold in lots for a combined total of €1.905m or almost €42,000/acre.
In Dublin, 16.5 acres near Blakescross, Swords, that had planning for an agribusiness estate sold for €43,000/acre while a 16-acre parcel outside Dunshaughlin that was zoned residential made €58,100/acre. It’s clear that zoned land in the greater Dublin area is coming back into fashion again. However, where land has been de-zoned and deemed agricultural again, a premium is not available.
Just a couple of years ago these types of properties were only making agricultural value or slightly more at €10,000 to €15,000/acre. It’s clear that the rise in national house prices is injecting a level of confidence that justifies the cost of building to the developer again.
Sites were a segment of the market which completely dried up during the recession. Agents report that they are now beginning to move again and fetch reasonably good money.
Forestry land
The demand for land suitable for planting is phenomenal. This area of the market that has gained a lot of ground since the changes to the Afforestation Grant and Premium Scheme in 2014, with tremendous interest now stemming from the non-farming community. Agents report that they can’t get enough of suitable ground to meet the growing demand from business people, pension groups, UK companies, wind energy consortiums and farmers themselves.
Big blocks comprising 50 acres and more and with good access are most sought-after but they must meet planting approval. Such is the demand for bare ground that some buyers are willing to pay between €4,000 to €4,900/acre, which is clearly putting a floor on marginal quality land in certain areas of the country.
Looking ahead
Given the outlook for milk, beef, and tillage, it would be difficult to envisage anything dramatic happening in the agricultural land market throughout 2016. Access to funding appears to be the single barrier to land purchase for many farmers and is something that could adversely affect the market, particularly if banks continue to tighten the lending strings and cash reserves begin to dry up in certain regions.
A number of agents report that they have a plentiful supply of land on their books for this spring. Demand still remains strong in many regions, particularly from young farmers, with additional interest emanating from business people, working professionals and the equine industry. Depending on the strength of sterling, there is also the possibility of Northern and UK-based spending power in the auction room again this spring.
The lull in the backend of 2015 is viewed by agents as temporary and many expect the market to continue at a steady pace again this year.
The 2015 Irish Farmers Journal Land Price Report reveals that the average price paid for land across the 26 counties was €8,914/acre, representing a 9.9% decrease on the 2014 average of €9,890/acre. Since prices halved to €10,200/acre back in 2009, the average price of land in Ireland has struggled to make up ground over the past number of years. This is the sixth year in a row that the national average has failed to break the €10,000/acre barrier and clearly indicates that the land market continues to be subject to regional volatility. The IFJ report is based on 1,654 farms/land parcels brought to the market, which equates to 74,629 acres offered for sale by private treaty, public auction and tender. The national average of €8,914/acre is based on 846 completed sales cross the 26 counties.
Land supply
The amount of land brought to the market last year decreased by 13.6% to 74,629 acres compared with 86,408 acres in 2014. This is the first decrease in supply since the low of 41,300 acres in 2010. 1,654 farms/land parcels were offered for sale nationally – this is down from 1,850 farms in 2014Cork topped the table with the most land offered for sale at 7,458 acres followed by Tipperary at 5,869 acres, Wicklow at 5,510 acres, Roscommon at 5,133 acres and Galway at 4,552 acres. Louth had the least amount of land at 424 acres offered, followed by Dublin at 786 acres, Leitrim at 842 acres, Donegal at 976 acres and Carlow at 1,117 acres. Given the 13.6% fall in the supply of land nationally, it’s not surprising that the volume of land offered for sale fell in 22 counties. Louth experienced the biggest drop – down by a massive 62% followed by Donegal at 48.9%, Dublin at 46.3%, Kilkenny at 37.6% and Longford at 33.7%. Just four counties recorded an increase in supply. Wicklow had the biggest increase at 45.7% followed by Tipperary at 18.7%, with mild increases in Galway and Roscommon, each at 1.1%. Leinster had the most land offered for sale at 30,495 acres followed by Munster at 26,011 acres, Connacht at 13,113 acres and Ulster at 5,010 acres. When compared with 2014, all four provinces recorded a decrease in land supply. Average prices
The national average price paid for land in 2015 was €8,914/acre. This represents a 9.9% decrease on the 2014 average of €9,890/acre. The average price of land increased in 12 counties, with the biggest increase recorded in Sligo at 22.1%, followed by Leitrim at 20.3%, Galway at 11.9% and Donegal at 7.3%. Only three counties experienced price increases greater than 10%.Average values decreased in 14 counties, with the greatest reduction seen in Wicklow at 48.5% followed by Dublin at 41.5%, Clare at 33.1%, Louth at 26.7% and Kilkenny at 26.6%. Eleven counties recorded an average of €10,000/acre or more (compared with 12 in 2014). Ten counties also had an average price of €8,000/acre or less (compared with nine in 2014). Kildare recorded the highest average price at €13,886/acre followed by Dublin closely behind at €13,736/acre, Meath at €11,861/acre, Wexford at €11,214/acre and Kilkenny at €10,883/acre. Leitrim had the lowest average at €4,869/acre followed by Clare at €5,391/acre, Mayo at €5,699/acre, Roscommon at €5,801/acre and Sligo at €6,089/acre. Leinster recorded the highest average at €10,271/acre followed by Munster at €9,190/acre, Ulster at €8,093/acre and Connacht at €6,183/acre. Residential versus non-residential
There were more residential farms offered for sale in 2015 at 33.6% (up from 27.5% in 2014) while 66.4% were non-residential.The price difference between residential and non-residential farms severely narrowed in 2015. The average price for residential farms was €9,591/acre – down 16% on 2014 when the residential average was €11,424/acre. The average price paid for non-residential farms was €8,649/acre – down 7% on 2014 when the non-residential average was €9,308/acre. Method of sale
Of the 1,654 farms that went to the market last year, 1,147 (69.3%) were offered for sale by private treaty, which clearly indicates it continues to be the dominant method of land sale. Public auction accounted for 30.4% of the total land offered, while tender accounted for just 0.3%. Properties that sold under the hammer made more than those sold by private treaty. Farms sold at auction averaged €10,244/acre while those that sold by private treaty averaged €8,413/acre. The success rate at auction made a significant recovery last year following a major fall in 2014. In 2015, 48% of farms that went to auction successfully sold under the hammer, while 52% were withdrawn (similar to 2013). This compares with a success rate of just 38% in 2014 and a withdrawal rate of 62%. Auction is the preferred route in some counties, while private treaty is more prevalent in others. Meath had the highest number of farms brought to auction at 53, followed by Wexford at 39, Westmeath at 38 and Wicklow at 36. Not surprisingly, Cork had the highest number of farms offered for sale by private treaty at 156, followed by Roscommon at 107, Galway at 86 and Tipperary at 73 farms. Just five farms were offered for sale by tender – a process which is not that common in this country, at least in the sale of farmland.Farm size
Small parcels continued to dominate the market in 2015, with 62.6% of holdings comprising less than 40 acres. Farms 40 to 99 acres accounted for 29.4% of the market while those ranging from 100 to 199 acres made up just 6.5%. Farms greater than 200 acres accounted for only 1.6% of the market. Smaller lots generated a slightly better price than big holdings. The average price paid for farms less than 40 acres was €8,974/acre - almost identical to that paid for properties ranging in size from 40 to 99 acres, which averaged €8,977/acre. Blocks comprising 100 acres or more made a bit less, at an average price of €8,118/acre. Cork had the greatest number of big holdings (greater than 100 acres) for sale at 15 followed by Wicklow at 12, Roscommon and Tipperary both at 10 and Galway at nine. Cork also had the greatest number of small holdings (less than 40 acres) at 105 properties followed by Roscommon at 88, Galway at 72 and Limerick and Meath at 60 each. Completed sales
The 2015 national average of €8,914/acre is based on 846 completed sales sold by private treaty and public auction. These transactions amount to 35,959 acres recorded as sold, which represents 48.2% of the 74,629 acres offered for sale. This is the highest number of successful transactions recorded since the first Irish Farmers Journal Land Price Report nine years ago. Of the 846 completed sales, 482 were private treaty results which were critical in order to obtain a comprehensive overview of the Irish land market. Public auction accounted for 229 transactions. A further 134 farms that were withdrawn at auction sold afterwards in a private deal. Leinster had the most land sold at 16,250 acres followed by Munster at 11,141 acres, Connacht at 5,735 acres and Ulster at 2,834 acres. In terms of most sales recorded, Cork topped the table at 77, followed by Roscommon at 61, Cavan at 52, Limerick at 50, and Tipperary and Meath at 48 sales. Louth had the least amount of sales at 10 closely followed by Dublin at 11, Waterford at 14 and Mayo and Leitrim both at 18 sales. Value of sales
The total value of land sales last year was just under €316 million, with almost 36,000 acres recorded as sold. Notwithstanding the fact that there was almost 12,000 fewer acres offered for sale last year, the value of sales is back from €395m in
2014 when 38,100 acres were recorded as sold. This gives a clear indication of just how important land sales are to the general economy and in particular to the rural community. A comprehensive breakdown of agricultural land prices in each county and is available exclusively inside the Irish Farmers Journal newspaper from Thursday 10 March 2016, as well as online for digital paid subscribers at www.farmersjournal.ie. Don't miss this FREE 72-page guide to agricultural land prices across Ireland!
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