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Values for prime arable land has strengthened across the UK by 14% to average almost £10,000 per acre, according to the latest survey figures. It is set to see 8% capital growth and 5% to 6% rental growth from 2015 to 2019, an analysis in the latest Savills farm land value survey suggests. The average capital value of farm land has shown very significant growth of over 250% during the past decade, however, this conceals regional variations with factors including land quality, position and local demand key drivers to an outcome. ‘The flight to quality, particularly in respect of arable farm land is a major contributor to the widening gap in values including between England and Scotland,’ said Alex Lawson head of Savills farms and estates. ‘If this gap continues widening the opportunity for investors to acquire land in Scotland starts to become quite compelling. Likewise there are buyers who are choosing to take advantage of the relatively good value poorer quality livestock land,’ he added. Market activity continues to include a variety of buyers and sellers. Last year non farming and lifestyle sellers accounted for more buyers than farmers compared with in 2000, when almost three quarters of them were farmers. On the buying side, political uncertainty coupled with the latest CAP reforms have encouraged some potential farmer buyers to sit tight. They represented 45% of all buyers down from 60% in 2011. The proportion of overseas buyers has remained steady over the past three years at around 8%. This is almost double the activity during the height of the recession from 2009 to 2011, but significantly below the mid noughties when collectively they accounted for over 20% of all buyers. According to Savills’s forecasts top quality agricultural land will be a long term performer in 2015 to 2019 with 8% capital growth and 5% to 6% rental growth, while investors with industrial properties as well as secondary office schemes could be set to see as much as 10% capital growth in 2015, with secondary retail at 9%. ‘Farmland supply is historically low, product is finite and competing land uses combined with diverse ownership keep values positive but a local understanding of market conditions is key to investing well in this sector, and only the top quality stock will achieve 8% growth,’ said Ian Bailey head of rural research at Savills. The report points out that the key to these returns is the focus on supply and demand fundamentals whilst taking into account factors such as the UK general election, mansion tax proposals and mortgage market review. However, whilst there may be an effect on sentiment in the run up to the election, the impact for commercial and agricultural markets is likely to be muted. Drawing on the macro-economic story, Savills predicts base rates will not move in the short… Continue reading →
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