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Brexit uncertainty leads to fall in demand for farmland

Demand has fallen for commercial and mixed use farmland following uncertainty over Brexit



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#Brexit uncertainty leads to fall in demand for farmland

Demand for commercial and mixed use farmland has fallen in the face of uncertainty following the vote to leave the referendum, according to the latest survey by the Royal Institution of Chartered Surveyors (RICS) and Royal Agricultural University (RAU).


Bare land prices are estimated to have fallen by 4 per cent in the first half of the year and 49 per cent of respondents expect prices to fall across all farm types over the coming year.


Average farmland prices fell to £10,750/acre (£26,553/ha) in the latest period. Average arable rents also fell by 8.8 per cent and average pasture rents fell by 6.7 per cent in the first half of the year.


RICS senior economist Jeff Matsu said: "Commodity price volatility was already negatively impacting sentiment in the rural land market prior to the EU referendum, and the outcome of the vote has added further uncertainty."


While uncertainty is currently playing a role in market demand, the report suggested farmland is still seen as a safe asset over a longer term.

 


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Encouragement

 

"Nevertheless, going forward, at least some encouragement can be taken from the potential for the Bank of England’s monetary policy stimulus to support activity," Mr Matsu said.


"In addition, the fall in sterling should prove beneficial to agricultural exporters and farmlands’ safe haven status may attract long term investors, particularly for prime holdings."


Commercial farm land demand fell most, dropping by 48 per cent and residential farmland fell interest fell by 19 per cent.

 

The report suggested uncertainty over the future of CAP payments contributed to the drop in demand.


Jeremy Blackburn, RICS head of policy, said EU subsidies 'play a role in propping up the profitability of many UK farmers and landowners'.

 

Land price statistics

4% fall in bare land prices


Avg. farmland price: £10,750/acre (£26,553/ha)


8.8% average fall in arable land rent


6.6% average fall in pasture land rent


56% expect commercial land price fall in next 12 months


42% expect residential land price fall in next 12 months

"The Government’s two or three year safety net was announced after our survey was closed, and, it remains to be seen how the rural land market will perform in light of these medium term measures."

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