Analysis of farm transactions for 2011 where Savills was involved in either the sale or purchase highlights some evolving trends in the profile of buyers and sellers.
Farmers
In 2011, the proportion of farmers selling farmland was at its lowest since 1993 at just 43% of all sellers. This compares with 47% in 2010 and continues the steady decline seen since 2006, suggesting a trend of improved confidence within the farming sector as noted in our introduction to this publication.
In contrast, the proportion of farmers buying land rose from 56% in 2010 to 61% in 2011. With the exception of 2009, this is the highest level recorded since 2001 and, as Graph 4 illustrates, continues the steady increase recorded by our research since 2003.
In 2011, farmers represented 54% of all buyers in the eastern regions, 65% in the Western regions and 69% in the northern (including Scotland) regions.
The main reason for buying farmland was expansion, which was cited as the primary reason in 50% of all deals. The majority of these were farmers expanding their farming businesses.
Buying for residential/sporting purposes is still a significant motive and was behind 25% of all purchases in 2011 compared to 19% in 2010.
This level is still not back to that (around a third) recorded in the first half of the last decade.
Private owners/investors
Our research highlights that since 2008 there has been a higher proportion of private landowners selling land than previously. In 2011 they represented 38% of all sellers. Conversely, the proportion of private landowners (new and existing) buying farmland has tailed off since the beginning of the latest recession, but in 2011 they still represented a third of all buyers.
The proportion of private landowners who were buyers peaked in 2003/04 when they represented around 45% of all buyers.
Private landowner buyers (new and existing) are more active in England than in Scotland, where farmers represent 70% of all buyers.
In England, our research shows that these buyers (new and existing) were more active in the eastern regions, where investors were busy buying blocks of large quality commercial arable farms for Inheritance Tax (IHT) reasons.
The proportion of debt related sales doubled to 13% of all deals in 2011 – the highest level since 2006. It is interesting to note that the majority of sellers in these cases were private individuals who were releasing capital for non-farming business interests, rather than farmers.
Personal reasons as the principal reason for selling was at the lowest level for 10 years and accounted for 25% of sales. This was significantly lower than the 42% recorded in 2010.
Corporate/Institutional
Corporate/Institutional seller activity was at its highest level for well over a decade at 17% of all sellers, with public authorities and to a lesser degree traditional institutions accounting for the increase. Raising capital for alternative investments was cited as the principal driver for selling.
Selling for investment elsewhere was the reason given for 40% of all sales (33% in 2010), which is the highest level since 1996. The sellers in these cases were mainly private and institutional landowners.
Corporate/institutional buyers represented just 5% of all buyers in 2011, similar to 2009 but lower than the 10% recorded in 2010 and the typical level of activity recorded in the mid 2000s, as illustrated in Graph 5.
Buying for investment reasons was cited as the principal reason in 17% of all deals in 2011, lower than the 31% recorded in 2010. This is due to the strength of buyers expanding their farming businesses rather than weaker interest in farmland as an investment.
Overseas
The Danes continue to be net sellers of British farmland, with the majority using their gains from the British land market to reinvest at home, where they benefit from rollover relief. They represented 5.3% of all sellers in 2011 and 4.2% in 2010. They were, however, concentrated in the eastern regions of England and represented 10% of all sellers here.
Graph 6 illustrates how the number of overseas buyers has fallen significantly since the beginning of this economic downturn. In 2011 just 3% of all buyers of farmland were from overseas compared with 22% in 2006. However, they still feature as prospective buyers and bought a few significant properties in 2011.
Source of buying funds
There were no significant changes in the nature of the funds used to purchase farmland during 2011:
- Cash (excluding rollover) remains the main source of funds for farm purchases and was used in 56% of deals compared to 54% in 2010.
- Low interest rates continued to encourage the use of loans, with 26% of purchases at least partly funded by debt finance compared with 27% in 2010.
- Rollover from other sale proceeds was used in 17% of deals compared to 15% in 2010, but the use of rollover money from the sale of land for development virtually dried up, being used in under 1% of transactions.
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