Oxford: Carter Jonas finds rural land prices stabilising
Carter Jonas reports in its annual Rural View that the long run of rising land prices is over, and that during the last year values have entered into a more stable and sustainable period, fluctuating only with normal flows of supply and demand. The broad picture, however, disguises the polarisation between prime land prices, particularly sales off market, which are continuing to creep upwards, while poorer secondary land in some parts of the UK is struggling to command interest.
Analysis has been carried out looking at wheat, land and oil prices since 2000 to mid-2016 and the results highlight some interesting points.
Catherine Penman, rural research at Carter Jonas, pointed out: “The dramatic rise in crude oil prices from 2008-2011 was due to the massive weight of money following the credit crunch, a driver which pushed up all commodity prices. Wheat and, even more dramatically, land reflected this, with land values rising by more than 30% in three years. Land was driven, in part, by commodity prices although mainly by the ever-decreasing volume of openly-marketed land and the growing volume of money chasing the sector increasingly perceived as safe, at a time when residential and commercial property were recording negative returns.
“Between 2011 and 2014 land values marched ever onwards, but with the sharp fall in oil prices through 2013 wheat prices fell too. The continued rise of land was primarily a result of the ongoing flow of money targeting the finite amount of agricultural land in the UK at a time when the mainstream property sectors were only just struggling to see the green shoots of recovery.”
Edmund Smith, partner in rural agency in Carter Jonas’ Oxford office, added: “The stabilisation of land values since 2014 is a combination of a number of poor harvests, pressure on commodity prices and in 2015/16 investor confidence with the growing uncertainty of the EU Referendum and the potential impact that will have on CAP subsides – though the Government’s recent announcement guaranteeing the Basic Farm Payment to 2020 will be seen as a positive indicator. Additionally, bank funding has concentrated on the ability to service the loan which has placed a further restraint on the purchasing ability of a number of farmers who would have previously had an acquisitive appetite.”
Looking to the future, Smith continued: “While the overall national picture is that land prices have found a new equilibrium in terms of supply and demand, in Oxfordshire and in key locations across the South East, despite Brexit, we have seen demand for prime land continue unabated. For so long, the market has been restricted by only circa 100,000 acres per annum of openly-marketed land and values inflated as a result of demand chasing diminished supply. But the balance has shifted and the present level, in terms of price and volume for sale, is forecast to remain over the next two to three years. Rural land will continue to be an attractive sector drawing a number of investor types over the medium-term.”
For a copy of Rural View, email: [email protected]
