Our analysis of farm transactions across Great Britain, where Savills acted for the buyer or seller shows that the demand for UK farmland is diverse – both in the types of buyers and their motives. This is a key factor differentiating the farmland market from alternative investment markets. In addition to the principle motives illustrated by Graph 5:

■ Farmland is seen as a ‘safe haven’ especially in turbulent economic times

■ Conservation and the environment motivates farmers and conservation bodies

■ Farmland is an efficient asset for the transfer of wealth

■ Owning a piece of the countryside or a trophy asset motivates ‘lifestyle’ buyers

Our research shows that, over the past few years, there has been little change to the proportions of the different types of buyer. Farmers represent around half of all buyers, non-farmers/ lifestyle (whose principle motive is other than income generation) another 40% and institutional/corporate buyers about a tenth.

The main change since the recession is the proportion of non-farmer/lifestyle buyers making their first farmland investment. We expect this trend to reverse as the economy improves over the next few years and confidence returns to the country residential market.

The overall profile of seller type is also fairly static with:

■ Farmers representing around 45% of all sellers;

■ Non-farmers, including private trusts around 40%; and

■ Institutional/corporate sellers the remaining 15%.

However, it is apparent that debt related sales accounted for a higher proportion of sellers. In 2013 these crept back to the highest level since 1996 (see graph 6) when interest base rates were 10%.

This suggests recessionary pressure, the volatility of commodity prices and some difficult physical conditions over the past two years put pressure on some rural businesses. Although the majority of debt pressure in 2013 was with farmer sellers, non-farmers with off-farm business interests were not exempt.

In addition to debt, other reasons sellers cited included:

■ Relocation: 16% of sales (similar to 2012);

■ Investment off-farm: 31% down from around 40% in the past two years – suggests that debt has become a more pressing issue;

■ Retirement, death and other personal reasons were recorded in the remaining third of sales, which was similar to 2012 levels.

The proportion of overseas buyers in 2013 was similar to 2012 at around 8% of all buyers of which half were from the EU (excluding the UK). Activity from these buyers has some way to go to reach the 20% (mainly Danes) recorded in the mid-noughties before the credit crunch.

Cash continues to be the predominant means of purchase in over 70% of all sales. Historically low interest rates have not tempted buyers to increase the use of loans to purchase farmland with only just under a third of all buyers using debt – a level which has been consistent for the past eight years.

Taken from
Market Survey: UK Agricultural Land 2014