Land Prices: Location, Location, Location
Thomas Armstrong, Director, believes current interest rates may be the new norm, but demand for land in the right location remains strong.
Despite continuing higher interest rates, land is still attracting a lot of interest and achieving significant prices, but successful sales are becoming more and more reliant on location and neighbours.
Higher interest rates have had the biggest impact on agricultural purchasers; lifestyle and investment buyers have always been selective as to where they wish to purchase. So, if your land or farm for sale is outside the area where investors or lifestyle buyers want to live, you are reliant on agricultural buyers, and they are currently much more cautious than eighteen months ago.
Given interest rates, commodity prices, and the reduction of BPS, greater caution in both buying and selling is hardly surprising, particularly among the sheep and beef farming sectors, who have had two years of large reductions already, and no prospect of any scheme to replace BPS.
The market has not gone backwards, but it is definitely more challenging, and the time required to complete a sale – particularly by private treaty – is now longer. The process from acceptance of offer through to exchange of contracts has been especially delayed, and some sales are falling by the wayside.
More than ever, a successful sale needs someone with the time and commitment to drive the process along. And it has never been more important to make absolutely certain that everything is in order before you bring your land to market.
In spite of the challenges, we have had a good year for land and farm sales across all our H&H Land & Estates offices in 2023. Our prediction is that next year we will see many more thousands of acres coming forward through all our offices across the North, with a strong base of clients already signed up to launch and several private deals to complete in Spring 2024.
There is no knowing what 2024 will bring in terms of the markets, but we see no reason why we should not maintain a similar level and perhaps an improvement with SFI coming on stream, milk prices improving and input prices beginning to soften. The next generation of farmers need confidence in the Government and the system, and they need benchmarks to be set for payments, but there is still a strong foundation of younger farmers with the ambition and enthusiasm to commit their future to the land.
Recent auctions have demonstrated how sales are being driven by a widespread belief that the future is farming at scale, and by location, with many land and farm sales knocked down to neighbouring farmers and farming enterprises, and especially those with the next generation waiting in the wings.
Our recent sale of land at Temple Sowerby proved the demand for the right location very clearly, with all lots sold to local farmers within the area who wanted to extend their existing farming enterprises. Determined bidding pushed the guide price of £978,000 to a final total of £1.46 million – a phenomenal 49% over the asking price.
Another area of the market coming to the fore much more frequently is land being sold for woodland and biodiversity purposes. Just last week we brought a 170 acres of land near Hexham to market offering rough grazing land for forestry and offsetting biodiversity as a whole or in five lots. There has been so much interest a closing date was set within ten days of marketing, with huge interest from private individuals and those looking to establish woodland carbon offsetting biodiversity.
In South Cumbria, we have seen a reduced supply of agricultural land coming onto the open market in 2023 compared to 2022, with larger farms and blocks of land being particularly rare. As such, demand and prices have remained strong, especially for lifestyle properties and smallholdings. Small parcels of woodland and amenity land for grazing and conservation are in high demand too from a wide range of potential purchasers. For example, H&H Land & Estates auctioned 6.25 acres at Underbarrow last month which achieved £96,000, £15,360/acre and more than 50% over the guide price.
Whilst there has appeared to be less open market sales in South Cumbria, we have been involved in a number of off market transactions acting for both sellers and buyers. Given the wide range of investors and importance of location and access, it’s vital to have the land valued correctly prior to any sale in order to ensure a fair price is achieved and reduce the potential for complications later in the conveyancing process. Our team of RICS registered valuers can provide comprehensive sale and pre-purchase reports to help aid and provide the tools required for such negotiations and sales.
In summary the market in 2023 has proved that family farms will continue to exist and thrive but, only alongside diversification or off-farm working business. Interest rates are of course having an impact, but after years of very low interest rates and cheap money, buyers today are adjusting to a new norm. Rates may soften slightly to between 4% and 5% going into 2024, but higher rates are not deterring serious buyers looking for the right land in the right place.