Supply 2013

Our research shows the volume of farmland publicly marketed across Great Britain in the first six months of 2013 was 4% lower, at 82,000 acres, than in the same period of 2012 and the lowest level since 2004 (72,000 acres). Anecdotal evidence suggests the bad weather may have prompted this slower than usual start, as activity during May and June 2013 was more significant than in previous years.

This is illustrated in Graph 2, which shows that this is even more so in Scotland than in England, where 86% of activity occurred in the last two months – the highest proportion recorded in the past decade.

In England, first half year supply was similar (-1%), at just over 58,000 acres, to the same period in 2012 although there were regional variations. Activity increased in the South East of England (+45%) and the West Midlands (+58%) although from a relatively low base.

The largest falls in supply were recorded in the East of England (-39%) and the East Midlands (-16%). Just 6,000 acres were publicly marketed in Wales although this was more than the 3,500 acres recorded in the first half of 2012.

Values

According to our Farmland Value Survey, average growth for prime arable farmland rose by 4.1% during the second quarter of 2013 across Great Britain giving total growth during the first half of this year of 6%. This growth came from transactions in the English market and especially from the eastern regions as illustrated in Graph 3.

Farmland values across Scotland and Wales remained stable during the same period, where market activity was especially slow to start.

As reported in our Q1 Farmland Market report, the market remains increasingly diverse with value growth related to location, quality and type of land and the residential weighting of the farm.

This pattern continues with the best arable land recording the highest value growth and poorer quality land witnessing weaker growth. To illustrate, in England, grade 3 arable values rose 4.1% during the first half of 2013, whereas grade 3 grassland values increased just 1.8%.

However, average values hide regional variations with significant variation in the range of values and levels of interest. For the right opportunity top prices continue to be paid, particularly where this involves adding a block of land onto an existing holding as well as for the best all round packages to new tax driven investors.

Buyers and Sellers

Our analysis of farm transactions, where Savills acted for the buyer or seller, for the first half of the year indicates that non-farming landowners rather than farmers were the dominant sellers. This is the reverse of the trend recorded to date.

Our research shows debt related sales have increased from 14% in 2012 to almost 30% during the first half of this year with the largest proportion of these being non-farming landowners. This suggests they are taking advantage of the increase in farmland values to help support their mainstream business assets.

Our analysis shows buyer profile during the first half of 2013 is similar to 2012 with farmers representing half of all buyers. Around 40% of purchases were completed by private buyers whose primary motive was other than income generation from farming.

Of these buyers there was an almost equal split between those who already own farmland and those who are purchasing for the first time.

Almost all farmer buyers are buying

to expand their current farming business with expansion cited in 40% of deals. 20% of all buyers cite investment as the principal motive for buying. The main reason in a further 30% of transactions was either residential or sporting.

Cash, as the predominant source of buyers funds still features in around three-quarters of deals suggesting that demand for farms and estates is wealth driven.

Taken from
Market in Minutes: Q2 Farmland Market