Property Articles | Real Estate Articles

Bare land prices continued to hold firm in the weakening economic market but the price of equipped farms fell in the fourth quarter of 2008 according to the latest research by Smiths Gore.

There was a significant increase in the number of equipped farms being marketed between July and September last year which can be partially attributed to the drop in price, however, the outlook remains optimistic, especially for further rises in bare land values.

"The asking price of bare farmland rose to an average of £5,700 per acre in 4Q2008, up 2% on the average of £5,500 in 3Q2008 and up an incredible 8% since the start of the year. Although some land failed to sell, actual sale prices held up well and did not change significantly from 3Q 2008" according to Giles Wordsworth, Head of Farm Agency.

"In contrast, the average asking price of equipped farms fell to £6,800, down 8% on the average of £7,400 in 3Q2008 and down 22% since the start of the year."

Locally the potential purchaser is still demanding quality and such farms, bare land or equipped, will defy the market every time. Some farms are still attracting a huge amount of interest and are selling well. However, in general the price between bare land and equipped farms, the 'equipped premium' has dropped significantly from an average of £3,800 per acre between 2006 and mid 2008 to £1,800 in 3Q2008 and £1,100 in 4Q 2008.

The significant shift in the market can be attributed to a number of factors including:

• Diminished demand for residential farms and from the non-farmer buyer.
Farmer-purchasers were behaving more cautiously due to lower commodity prices and higher input costs, both of which were compounded by a poor harvest, however there is a resurgence of optimism due to the recent drops in the prices of some agricultural inputs.

• An increase in equipped farms being marketed between July and September Previously the greatest amount of land is historically marketed in the second quarter but in 2008, about 70,000 acres was marketed in the third quarter with vendors trying to sell at the top of the market. This influx of land onto the market has been partly responsible for the drop in equipped farm prices since mid 2008. As a consequence sales are taking longer to complete as the market has switched to favour the buyer.

• Local house prices
The farmland market has also adjusted in the second half of 2008 to take account of the falls in residential house prices and this has fed through into the asking prices for farms. However, there are signs that local purchasers realise that well-place rural property is always likely to be in short supply and therefore attractive farmhouses are likely to command their asking price.

The outlook for 2009 is one of quiet optimism according to Giles Wordsworth with a marked increase in interest from buyers.

"Bare land prices have not yet been significantly affected by the residential market, the credit crunch or the wider economic downturn. Many farmers remain optimistic about the core business of farming and agricultural land is still considered the preferred safe investment when money on deposit is providing such small returns. We expect bare land prices to continue to rise and prices for equipped farms may also return to their long-term upward trend."