The volume of land coming to market in Britain was significantly lower in 2019 than in previous years. As a result, average land prices have increased slightly. The main reason for the lack of land coming on the market seems to be Brexit uncertainty on the part of sellers, but not buyers. Land prices grew this year for only for the second time since March 2015.

“We have seen a continual decline in farms coming to the market,” said head of rural research at Savills UK, Emily Norton. “Brexit uncertainty is what is quoted to us all the time. It’s uncertainty from sellers, not buyers. Where land is available it is sold. Average prices are slightly higher than in previous years.”

By the end of September 2019, Savills was able to say that Britain has experienced its lowest number of open market farmland launches since its records began in 1995. Savills collates data on farmland sales that are publically marketed in England, Wales and Scotland, even if they are sold by other estate agents.

Total acres marketed by the end of September in Britain fell to 105,000ac which is even lower than the acreage recorded in September 2004 (116,000ac) when uncertainty prior to the introduction to the single farm payment affected the market.

The east of England this year saw a 67% decline in land coming to the market, there was no change in acreage in the north of England and a 30% decline in the southwest. Scotland is down 44% and England overall is down 37%.

“It’s almost like the sellers don’t believe the buyers are there,” Norton said. “We have been doing some interesting analysis on currency changes too. Since 2014, land is 22% more affordable to a euro buyer and 44% to a US buyer. It basically means a US buyer is getting 44% more land for the same purchase price. However, this has changed since the sterling strengthened last week after the general election in the UK. Anecdotally our agents have said that 50% of properties sold that are over 500ac is to international buyers, mostly from Europe or the US.”

Next year

Looking forward, the eventual outcome of Brexit negotiations is expected to increase market activity in Britain. Clarity in the political and economic environment may bring more land to the market.

“There are big forces at play under the surface at the moment. We have major pieces of legislation proposed, some of which are needed to replace the CAP policy such as the draft agriculture bill,” Norton said.

“We are also seeing more legislation around the environment. On the one hand, policy promotes the ‘polluter pays’ principle, so there is increased level of effort required to look after land. Then on the other hand, policy is creating new streams of income on agricultural land. My feeling is that it is putting a new base in the market. Even on poorer-quality land people are thinking we can use it for some kind of offsetting like carbon or public access. So that land can have multiple benefits, it can produce food, regulate carbon and produce public access.”

I’m very excited about UK land as an asset. It’s going to be a big change of mindset to people who are very wedded to intensive agricultural production

According to Norton, the increasing focus on the environment is making land more attractive to investors. There is potential for marginal land to be used by corporate entities to offset carbon production by planting trees, for example. It also offers alternative streams of income for investors that want to go down the route of renewable energy.

“I’m very excited about UK land as an asset. It’s going to be a big change of mindset to people who are very wedded to intensive agricultural production. In parts of the south of England, where development pressures are higher, there are interesting changes in areas like residential developments and nitrates.

“Planners and farmers are going to have to work together on water quality, for example. Those things can be done in a partnership fashion either by modifying farming practise or delivering services that communities want and need.”

Farm payments

With the UK set to leave the EU in January, farm payments will be legislated for in Westminster instead of Brussels. Norton says that this is unlikely to have a major impact on land prices.

“There is a very weak correlation between land prices and direct payments. In England, we have had internal convergence. Everyone receives the same amount of money per hectare, Scotland and Wales have transitioned slightly slower. The lowland rate is about £225/ha depending on the exchange rate.

The competition to buy it is still high

“[Even if we lose our farm payments], all of the other reasons a person with money that might want to invest in land are still there. The competition to buy it is still high. The property rights associated with it are still there. The benefits of investing in land are still high; it has never collapsed in price. And the reasons to invest in land will get stronger as our environmental ambitions grow.”