Average farmland prices in England and Wales remained steady in the first three months of 2019, yet uncertainty over the future of the UK land market persists, especially with regards to Brexit, according to the recent farmland index from estate agency Knight Frank.
Market values continued to hover just below £7,000 per acre, which is 3 per cent lower than the same period last year and a decrease of 5 per cent compared to five years ago. However, land values are still 50 per cent higher than in 2009, according to the recent index.
With various Brexit scenarios still on the table, it seems unlikely for any meaningful shift in farmland prices to occur for the rest of the year, says Knight Frank. However, the report also states that land markets across England and Wales will remain highly variable, regardless of the average price trajectories.
Potential decline post-Brexit
The lack of clarity about the future of the farmland market after Brexit leaves potential buyers and sellers uncertain. Brexit may lead to a sharp decline in the average value of bare agricultural land, commentators on the farmland index argued.
Moreover, cereal and milk prices were higher than they were last year, while beef and sheep prices dropped. With the perception that the livestock sector, especially in upland areas, would have the most to lose when leaving the Common Agricultural Policy after Brexit, the difference between arable and grassland values could widen, the index estimated.
Clive Hopkins, head of farms and estates of Knight Frank, commented: “I’m not so sure that this should be taken as a given, regardless of whether we are in the European Union or not…there are still plenty of reasons to own farmland and there are other arguably more pressing challenges facing farming.”
Mr Hopkins added: “What I do believe is that the market will become even more variable than it already is. For example, as area-based support payments are gradually scaled back, soil quality and productivity will become much more important to commercial farming buyers.”
He explained that it is not to say that merely the best agricultural land will be in demand. As support shifts towards the delivery of environmental benefits, more marginal farms may be able to create new income streams.
Mr Hopkins concluded: “But until politicians in Westminster and Brussels get their acts together, we can only wait impatiently for some kind of normality to resume.”