Rural land prices look set to fall

Growing uncertainty over Brexit and insecurities regarding future subsidies, as well as low commodity prices, continues to drive down demand for rural land across the UK which is placing downward pressure on values, according to the Royal Institution of Chartered Surveyors (RICS).

RICS is now calling for greater support for UK rural economies, as land prices look set to fall during Brexit negotiations.

The slowing of the market is expected to lead to a further decline in prices over the next 12 months, with 17% more respondents forecasting that prices for land with a residential component will fall rather than rise, and the price outlook is even weaker for commercial farmland, with a net balance of 31% of respondents expecting values to decline over the next 12 months.

They believe that demand for farmland has decreased, having now been declining for the last 18 months, causing prices to drop to £10,233 per acre in H2 2016 — this is down 7% from last year.

Gerard Smith, chairman of the RICS rural board, said: “It’s clear we are now in uncertain times and beginning to evidence the impact on land values.

“Coupled with continued declining agricultural profitability, the uncertainty caused by Brexit, and concerns regarding levels of agricultural support post 2020, greater caution is being exercised by both buyers and sellers.

“This is combined with a stronger divergence between land values based on quality and location.

“Demand, supply and average land values have fallen and price predictions going forward suggest further declines.

“However, as always, the right land in the right place should sell.”

Investment land yields on investment land also continued to drift lower, edging down to 1.5% from 1.6% previously.

During the second half of last year, 63% of buyers were individual farmers while ‘lifestyle’ purchasers continue to account for just under a quarter of purchases. This composition has remained more or less unchanged over the past two years, following a significant decline in lifestyle buyers just before the onset of the global financial crisis.

Jeremy Blackburn, RICS head of policy, said: “Our survey shows that demand is continuing to slow for land, with very localised markets playing a key role, at the same time lower commodity prices and higher costs are biting.

“Brexit is then an overarching sense of uncertainty.

“Government’s guarantee of payments out until 2020 gives land based businesses certainty, but also gives the sector the chance to work with Ministers to craft this new system.

“Government need to modernise the systems of land classification/capability for agriculture and review permitted development rights to enable more conservation-related activities reflecting the ever increasing demands on UK land for a myriad of uses.”