The land market may experience a brief Brexit or ‘Brelief’ bounce, but supply is likely to remain tight and the longer term focus may be just as much on environmental services as food production.
That is the end of year and decade verdict from a selection of land agents.
Emily Norton, head of Savills rural research, said:“Many landowners and farmers will welcome the certainty that a decisive election result gives, particularly around support which is protected for the duration of the Parliament, with policy evolving rather than changing radically and quickly."
If there are no significant changes trading arrangements with the EU or UK taxation, with improvements in incomes and investor interest in agriculture, then Savills expects GB land prices to firm by 12.5 per cent by 2024 to an average of about £3,035/hectare (£7,500/acre).
However, a hard Brexit and more exposure to global markets could result in a drop of a similar magnitude to less than £2,428/ha (£6,000/acre).
Land sales have been at a 10-year low in 2019 and Ms Norton did not expect there to be a rush of sales once the first phase of Brexit is done at the end of January.
She added: “Greater certainty around future policy means there is no massive incentive for landowners to sell.
“But for those who do want or need to sell there are willing buyers – either neighbours or others. Of the 500-acre plus farms sold in 2019 half have been to overseas buyers.”
Ms Norton said the environment could be the greatest land market driver over the coming years as farmers were rewarded for increasing biodiversity or tackling climate change through carbon sinking and other schemes.
“New environmental offsetting schemes will provide opportunities. For instance, there is a requirement for one million new homes in the arc between Oxford and Cambridge by 2050," she said.
"It will require 34,000 hectares of land to build those houses but nearly double that area to offset the biodiversity and environmental impact of that development.”
Savills forecasted 2 per cent in relative returns a year from farmland over the next five years – 1 per cent in income and 1 per cent in capital.
That is the lowest return of a basket of 15 investments, with buy-to-let properties in the North West of England expected to deliver the greatest return at nearly 9 cent a year. Forestry is expected to deliver a 6.2 per cent return, although no income, reflecting its long-term potential as an environmental asset.
Any Brexit bounce is likely to take place soon after the UK leaves the EU, predicts Andrew Shirley, head of rural research, at Knight Frank.
He said: "The greater clarity provided by Boris Johnson’s sizeable majority in Parliament will help to release some pent-up demand and push land prices up again in the first half of 2020, with values levelling off again in the second six months of the year.”
He agreed that longer-term land market sentiment will be governed by the shape of the final Brexit deal and whether British farmers can compete with their European and global counterparts.
In the third quarter of 2019, Knight Frank estimated that prices fell by 0.8 per cent on the second quarter and were down one per cent on the year to an average of £6,975/acre.
That represented a 9.0 per cent drop over five years but a 40 per cent increase over 10 years and a near 4,000 per cent return over 50 years.
David Jones, of Robinson Hall, which operates across the Cotswolds and Eastern Counties, reported location continued to be key to sales.
The firm stated a sale of a block of Bedfordshire Greenbelt arable land with some hope of long-term development fetching £6,475/hectare (£16,000/acre), while similar quality land in Cambridgeshire where there was little local competition realised half that sum.
He said demand for pastureland was relatively weak but some can make £3,237/ha (£8,000/acre) given the right circumstances.
Meanwhile, parcels of pony paddock type land can sell well, with an acre at the edge of one village making £140,000 at auction.
Land price changes:
Source: Knight Frank