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 there was more selling activity by non-farming landowners than farmers.
In addition, our research indicates reduced selling activity from the corporate and institutional landowners. In fact, the figures suggest that net activity of these landowners appears to have shifted towards buying rather than selling.
So far this year, debt has not been an increased driver for selling farms. Debt related sales only increased from 20% in 2013 to 22% during the first half of this year. We expect this proportion to rise by the end of the year as commodity prices weaken and the prospect of an early increase in interest rates puts pressure on farm business profits and cash flows.
However, there appears to be an increase in ‘retirement’ related sales, these include those leaving farming and downsizing to a smaller unit. Our analysis shows these are all farmers, who are close to or have reached retirement age. This suggests they may be using the strength of the market to maximise the opportunities presented by the capital value of their assets.
Demand from non-farmer private landowners, whose primary motive was other than income generation from farming, has not waned. These, with farmer buyers, represent over 85% of all buyers creating the competitive demand driving capital growth.
Indeed, their motives tend not to be so influenced by the factors affecting farm profits and therefore will remain a key demand factor as commodity prices come under pressure. That said, farmers are still buying to expand their current farming business with expansion cited in 44% of all deals; representing the single highest reason for a farm purchase.
Cash, as the predominant source of buyers’ funds, still features in 80% of deals, suggesting that demand for farms and estates is wealth driven. Therefore, increased interest rates will have more effect on supply than demand.
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