Farmers are looking further to find where the land lies
In the first few months of 2018 we have seen a sharp rise in interest from farmers and landowners with windfall gains from development, looking to rollover funds close to home.
With a continued lack of farmland supply to the open market, many rollover buyers are struggling to place these cash funds locally, forcing consideration of opportunities further afield to secure the tax relief.
While the ability to rollover these windfall gains is welcomed, buyers must weigh up the cost benefit, especially where travelling distance increases labour, fuel and overall operating costs beyond reasonable margins. Where costs are high, some are considering mitigating these by means of contract farming and other similar arrangements.
Where opportunities arise to purchase farmland locally, with competing rollover buyers, values remain buoyant and in most cases, continue to strengthen. We expect rollover buyers to account for a significantly higher proportion of the buying market this year and into the foreseeable future.
Farmers remain the dominant buyer type, accounting for about 50 per cent of purchasers according to our research, derived from Fisher German’s regional agents working across England.
We expect a fall in interest from the in-hand farming buyer over the next few years as incomes remain under pressure and further clarity is sought over future domestic support for the agricultural industry.
Lifestyle buyers are showing increased interest in the farmland market again. As values in some areas have softened, we have seen buyers looking more favourably towards land and properties with amenity, sporting and conservation aspects. These buyers are less reliant on the agricultural element to provide a healthy income, being more concerned with the residential element.
Institutional interest in farmland remains static, accounting for about 10 per cent of purchases according to our research. Such interest will continue to be directed towards more strategic holdings which are low risk and will retain value.
Debt and retirement-related sales are expected to increase this year. Interest rate rises, increased borrowing costs and a likely future fall in farming subsidies have pushed some businesses into more difficult times. Some in this situation are considering sales in part to reduce finance costs, while others are looking to exit the industry or downsize.
Many larger scale arable enterprises are considering their future in regard to support and long-term income projections. We have seen some restructuring their farming business, others deciding to exit and some continuing to farm through joint venture or contract farming arrangements.
Retirement has been at the centre of many farm sale discussions over the last 12 months. Those farming without any successors or where there is a break in farming partnership between family members are often taking the opportunity to wind up the farming business and securing entrepreneurs relief on sale.
We have also seen in the last six to 12 months interest from farmers close to major developments offering land privately where a substantial premium may be achieved. There have been various off-market deals where businesses have benefited from sales of part or entire farms to some aggressive buyers.
Richard Gadd is from Fisher German’s national country agency team
