The latest Farmland Market Update from property consultant Carter Jonas revealed that average arable land values rose by 0.9% to £9,722 per acre, while average pasture land values climbed 0.7% to a new high of £7,889 per acre.
Carter Jonas explained that some buyers and sellers have accelerated their activity over the past few months in order to complete sales and purchases before the UK Government announces its first budget on 30 October.
Meanwhile, the firm said that some farmland launches have been delayed and could instead hit the market in the Spring of 2025 when more clarity exists around the tax treatment of agricultural land and property.
“Land values’ upward trajectory is being underpinned by historically low levels of supply and evenly matched levels of demand,” commented Andrew Chandler, head of rural agency at Carter Jonas.
“The market is also attracting more alternative buyers (particularly for natural capital purposes) and is benefitting from the presence of ‘waiting capital’ from rollover funds.
“Many assets are performing well but we are seeing some segments of the market becoming more price sensitive. Therefore, it’s essential that land is realistically priced, as we aren’t seeing values being routinely exceeded anymore, thanks to the increased cost of borrowing and a cautious ‘wait-and-see’ approach to the upcoming budget.”
The last 18 months have seen some of the economic challenges facing the UK lessen, with the food and drink sector in particular no longer experiencing record levels of inflation.
“[Falling inflation] enabled the Bank of England to lower interest rates in August, marking a positive turning point, and a further base rate cut is likely before the end of 2024,” said Sophie Davidson, research associate at Carter Jonas.
“We expect lower borrowing costs to boost the housing market (benefitting buyers purchasing land with residential assets), improve cash flow for those with existing debt, and expand the pool of potential buyers who rely on financing.”
However, Chandler cautioned that many buyers and sellers remain keen to see what is announced in the budget before making their next move.
“Although we don’t expect changes to trigger an immediate or significant response from the industry, increased clarity should improve market sentiment,” he said.
“Landowners will also be keen to learn more about the tax treatment of land used in environmental schemes as that will play a key role in future land management decisions, as well as sales and purchases.”
