The outlook for 2011 is excellent reports Richard Nocton of the Farm & Rural Marlborough office of Woolley & Wallis.

He told South West Farmer that the forecast is backed up by a very active summer and autumn trading of farms, land and equestrian property where a number of properties have gone under offer quickly to cash buyers and often at or over the guide prices. The underlying strength of the market is fuelled by a distinct lack of supply of land to the market and it seems as if this trend is set to continue. The recent chaos in the financial markets and the economic downturn has encouraged investors to look to a safe haven for their money. There’s a huge element of comfort that comes with owning a tangible asset and that no-one can take it away from you.

Buyers
At present the land and farm market has come under close scrutiny of both farmers, who are looking to expand their enterprises by building a bigger business. In addition there have been a number of investors who now regard the agricultural industry as giving a sensible return on capital and the property market is still seen as having good prospects for yield and capital growth.

This has allowed a number of “sale and leaseback” type transactions to happen. Interestingly these are perhaps more frequent on the “off” market where deals are done privately and there is no publicity. This often suits both parties who are looking for confidentiality but for the deal to happen. Investors view the purchase of land as a sensible investment giving as good if not better return than putting the money on deposit at the bank. Non farming as well as farming buyers are often in need of specialist advice, support and finance.

Banks/Lending
There is much confidence in the market and this is supported by an active lending environment. Despite rumours and press comment to the contrary, lending to the rural market is buoyant and flourishing. This in turn has helped support some very strong bids and high sale prices. Land has always been seen as a good long term investment by both farmers and bankers. The banking fraternity now regard agricultural land and property as a sound and safe sector to lend capital to.

Taxation benefits
The agricultural industry has always been kindly favoured by the Chancellor of the Exchequer and a soft tax regime exists to encourage people to hold and own land. There are numerous Inheritance advantages and significant amounts of capital invested in land can be handed down to the next generation without attracting the attention of HMRC. It has been indicated that these tax advantages are likely to remain in place for the foreseeable future and this will only help support the value of agricultural land and maintain prices at their current or higher levels.

Outlook
With the increasing strength of the wheat market and some semblance of profitability coming back to the dairy industry, there is the natural inclination for farmers to hang on for a few more years and to take advantage of these better prices. The effect if this will be to tighten the supply even further, this will ensure that there are still many buyers chasing fewer and fewer farms, thus creating an onward and upward spiral of prices.

Even four years ago who would have thought we’d have got to £5,000 per acre, nowadays, £7,000 is regarded as the benchmark and it is not uncommon to find two buyers competing against each other to pay £8,000 or £8,500 per acre. This naturally gives rise to speculation and the hope that the “holy grail” of £10,000 per acre is now not far away.