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 buyer and seller and their motives.

Sellers

On the selling side, our research suggests that 2014 was the first year since we began our analysis in 1992 that non farming (lifestyle) sellers were more active than farmers. Traditionally farmers have been the principal farm sellers and between 1995 and 2007 represented over half of them peaking at almost three quarters in 2000 (Graph 4).

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Farmers cite retirement (40%) as the principal reason for selling with another 23% selling for debt related reasons, with other personal reasons including death and relocation. The remainder indicate that they are making the strategic decision to sell and reinvest the capital outside of farming. On the other side of the equation, our research indicates that sellers whose primary motive for owning land is not farming are principally selling to relocate (44%).

This has created a degree of liquidity in the market as these properties tend to come to the market more frequently than those which have been in farming families for generations. In addition:

■ Debt is also an issue for non farming landowners and 14% cite this as a reason to sell, although research shows this is a significantly lower proportion than in the height of the recession

■ 30% of these sellers are selling to invest in non farming assets and with the significant growth in farmland values over the past decade they are likely to be selling at a good profit

■ Family and personal reasons, including death, are cited in the remainder of sales.

As would be expected, almost all (90%) of institutional and corporate, including developer, sellers are investing elsewhere although this group is not immune to debt, which was the reason for sale for the remaining 10%.

Buyers

The proportion of farmer buyers has fallen significantly over the past few years and in 2014 they represented 45% of all buyers down from 60% in 2011 (Graph 5). The last time the buying activity of farmers was at this level was in 2003 and 2004 the years before the Mid Term Reform of the CAP.

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This suggests the uncertainty surrounding CAP reforms, the political issues, which include the General Election and the Scottish Referendum, and the pressure on farm incomes as commodity prices fall have made farmers more cautious about taking on large capital commitments in the current economic and political climate.

Expansion of the farming business remains the core reason (around 85%) motivating farmer buyers, with the remainder relocating or buying the freehold as a sitting tenant.

Graph 5 shows that in the late 1990s farmers were consistently the most active buyers but since 2000 the competition from non farmers or ‘lifestyle’ buyers (those whose primary objective is not income from farming) strengthened and they represented 40% to 50% of all buyers in the mid noughties. The recession reduced the activity of non farmers and especially those who were new to the market. In 2014, our research indicates that new ‘landowners’ are beginning to return to the market, representing 23% of all buyers compared with 15% in 2013.

In contrast to farmers, private non farming buyers are citing the principal reason for buying farmland as residential and sporting (40%) and capital investment including tax benefits (55%).

Institutions and corporates are important buyers and now represent around 10% of all buyers. They are driven by the opportunity farmland represents to:

■ Diversify portfolio (inverse correlation to other property assets)

■ Farmland has proved a safe and secure investment over the long term and in recent years has outperformed many other assets

■ Strategic development opportunities

■ Long term reversionary uplift.

The proportion of overseas buyers has remained steady over the past three years at around 8%. This is almost double the activity of these buyers during the recession (2009 – 2011) but still significantly below the mid-noughties when they represented over 20% of all buyers.

The effect of the diverse demand profile for UK farmland compared with nations where values are much more closely correlated to farm output and commodity prices is significant as illustrated in Graph 6. The graph shows farmland values in domestic currency to eliminate any exchange rate effect.

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Use of rollover funds increasing with buyers

Cash remains the main source of purchasing power often including rollover funds accounting for 80% of all buyers. This is an even stronger position than the 74% recorded in 2013. The use of rollover money is increasing with buyers using it as a means of purchase in 5% of deals compared with 2.5% in 2013.

However, this is still a long way from the very significant 25% recorded pre recession, but we fully expect rollover buyers to be much more prevalent over the next five years with the main target being large commercial units.

Taken from
Market Survey: UK Agricultural Land 2015