Richard Gadd from the National Country Agency Team at Fisher German has been looking ahead to what 2019 is set to bring.
Whilst awaiting further clarity around the Agriculture Bill, and specifically the proposed Environment Land Management Schemes, it is expected that the farmland market will remain calm.
Progressive farmers and diversified farming businesses will continue to invest, as will those looking at land from a sporting, amenity or tax-driven perspective.
With the phasing out of direct payments from 2021, we will start to see many land owners considering their medium-term business objectives. The ability to delink these payments from the requirement to farm will see some invest in new technology, some diversify into non-agricultural ventures and some look to capitalise the payments upfront and retire from farming.
We expect further discussions through 2019 with farmers and landowners regarding these various options as we plan ahead, and whether their existing land holdings are suitable both in terms of scale and quality for their individual objectives.
As soil health, productivity, environmental enhancement and greater animal welfare take priority under new farming policy, we predict buyers to demand more in-depth evidence of farming practices when looking to acquire new holdings in 2019.
Natural capital has been the key phrase in this area and those with a clear understanding of where environmental value can be enhanced through better soil and water management should certainly find adaptional to new policy more streamlined.
The key drivers in the marketplace will continue to dictate supply and demand levels. Any increase in borrowing costs, with a future reduction s in direct payment from 2021, will require farm businesses to really stress-test their operations from for long-term stability. We expect lenders to start requiring more regular business performance figures from borrowers to ensure continued financial strength.
It is anticipated the volume of farmland on the open market will increase again in 2019, based predominantly on further retirement sales and a move away from bare agricultural investments for long-term and institutional investors. Some receipts will be circulated back into farmland where strategic opportunities can be forecast.
Our initial forecast places a 5-10% increase in supply of land to the open market in 2019, against 2018 levels.
With such disparity and parochial variances in values recorded, the forecast for values must be provided on a holding-by-holding basis. Generally, we consider those well located, diversified and productive holdings will retain value on the back of increasing demand. We expect a slight softening in values across poorer livestock holdings or where holdings are sited in less favourable locations.
We forecast a continued and strengthening interest in smaller residential farms that provide amenity value and non-agricultural development opportunities.
Strategic holdings including those with long term residential and commercial development prospects will continue to attract great interest, as will land with mineral opportunities and mixed-use holdings with opportunities to add value.
Rollover buyers will of course continue to drive farmland values in certain areas. Where such funds have been created, those monies are generally directed towards local opportunities, often within 20 or 30 miles where possible.
We do not expect the current buyer/seller profile in the marketplace to alter drastically through 2019. Farmers will continue to represent the greatest proportion in both camps. We do not expect increased demand from the lifestyle/amenity and some overseas buyers, closing the buyer profile in their favour.
Farmers and institutional investors will likely represent the majority of vendors through 2019.