Farmers increasingly compete with non-farm buyers for land as forestry, environmental assets, outdoor spaces and privacy rise on the priority lists.
Conservation and climate change, additional income sources and lifestyle ambitions are increasingly driving the agricultural land market.
On the other hand, supply begins to increase, values are held up, and farmers are as well placed as anyone to benefit from the growing interest in the many advantages of the land.
1. Offer sought
The land market has experienced a strong recovery after an uncertain 2020 following the effect of the initial containment of Covid-19.
According to Farmers Weekly‘s land tracker, the free market acreage is up 76% from the same period last year, which in turn was down 65% from 2019.
The deluge of properties being launched stabilized somewhat, peaking in early May, when supply was up 370% from 2020.
Ignoring the 2020 anomaly, the number of publicly traded acres is fairly well in line with the five-year average, up about 16%.
Fisher German has reported a more than 10-20% increase in instructions year over year, depending on the location, and expects this to continue.
Several farmers have also sought advice on planning retirement sales, the agent said.
2. Huge demand
Interest is exceptionally high for both fully equipped and high quality farms in the right locations and farms that offer additional sources of income such as diversification or natural capital opportunities.
Forestry is in great demand, especially in Scotland where the best arable land also attracts many offers and prices well above £ 10,000 / acre are achieved.
With the general decline in supply in recent years, more volume is needed to satisfy interested parties in almost all regions, according to Fisher German.
The number of visits to properties is increasing year on year, showing pent-up demand.
3. Several types of buyers
Farmers remain the main buyers of land, but by a narrow margin, according to the latest data.
Covid-19 has accelerated the move towards remote working and the increased demand for outdoor space, meaning rural property is now seen as an increasingly desirable lifestyle asset, says Savills.
Lifestyle buyers often dominate the market, with refinance buyers also continuing to be active.
New entrants in terms of green investors – both individuals and businesses – are also joining the pack.
4. Stable land values
Farmland has long enjoyed a reputation as a safe asset, even in difficult economic times, and current market dynamics mean values are expected to remain stable.
Strutt & Parker say they expect prices to remain strong and the agent has already seen bidding wars this year, with two farms selling more than their guides.
Rising demand has yet to drive values higher, although it has given additional momentum to a market still trying to understand the implications of Brexit, according to Knight Frank.
The Agent’s Farmland Index shows average values have remained stable over the past 12 months at just under £ 7,000 / acre.
One of the reasons to be bullish on pricing is that there are still plenty of buyers with refinance money to invest, and this will only increase as the volume of development increases – a priority for the UK government.
5. Focus on forestry
The evolution of policies and actions around the sustainable development agenda has brought forestry to light as not only a financial but also an environmental investment, says Savills.
The annualized growth of timber prices in the UK was 10.6% for the five-year period up to 2020-2021.
Demand for timber exceeds supply and it is not uncommon for some forests to sell for 30-70% above the asking price.
In Scotland, hilly land and more marginal farmland with planting potential have seen the biggest price increases over the past five years.
Some of these investors are completely new to the market. The purchase of the 9,300-acre Kinrara Estate by BrewDog is one example. The brewing company plans to plant 3 million trees and restore degraded peatlands on the estate in an effort to achieve carbon negativity.
6. Environmental priorities
Savills says interest in farmland has also grown because of the role it can play in tackling climate and biodiversity crises through new sources of income derived from natural capital, such as net gain in biodiversity, water management and carbon sequestration.
Knight Frank has received over 60 inquiries for Lavington Park, a 340 acre stud farm in West Sussex.
While many enjoy equestrian facilities, some want to get involved in regenerative agriculture or other wildlife-friendly projects.
The agent had previously sold the 28,200-acre Auch & Invermearan estate in the Southern Highlands to a foreign buyer seeking to develop a landscape-scale habitat restoration project.
Interest in the potential for rewilding also appears to be far reaching – Knight Frank has reportedly asked three prominent Hollywood movie stars to get in touch this year because they want to buy a farm to rewild.
7. Popular private market
Meanwhile, private sales continue to grow, with leading customers, neighboring farmers, and refinancing buyers supporting the market.
The benefits of doing ad-free transactions include discretion, flexibility, saving time and money on marketing, and the possibility of an exclusivity bonus.
Agents say there has been renewed interest in the past 12 months due to the pandemic, following uncertainty among buyers and sellers over the effect of the first foreclosure on the open market .
These concerns appear to have been unfounded, but off-market offers are expected to remain popular, particularly for properties over £ 5million, where the buying pool is already more limited.