Reports from two major firms this week both point to market weakness, but also widening price variation, even at local level. Reasons for the uncertainty are diverse, according to experts.
The first quarter 2016 drop of 3 per cent in English farmland values, as recorded by the Knight Frank Farmland Index, was the largest quarterly decline since the final three months of 2008, following the Lehman Brothers bank collapse.
Estate agency Knight Frank said averages have dropped back below £19,760 per hectare (£8,000/acre).
Knight Frank head of rural research Andrew Shirley said: “Agricultural commodity prices remain low with little prospect for a strong rebound in the short-term, while the potential implications of the UK leaving the EU are adding further uncertainty.”
But he was also anxious to put the drop in values into context, noting the average value of farmland was still only £44.46/ha (£18/acre), lower than it was at the end of 2014, and remained almost 180 per cent higher than it was 10 years ago.
“Whatever the outcome [of the referendum], we are still seeing strong demand from farmers who are either not reliant on EU subsidy payments or have taken the long-term view expansion is the way forward for their businesses,” he said.
At Strutt and Parker, head of national farm sales Mark McAndrew said price variations were widening as agricultural commodity markets remained weak and buyers showed more price sensitivity.
“There is a massive range of prices depending on what the land is, its size and where it is,” he said.
“A year ago it was the larger blocks of land which were most in demand, but in some regions we are now seeing smaller 50-acre blocks securing the higher premiums.”
But Mr McAndrew was of the opinion the upcoming EU referendum had less of an impact on land values than some had predicted and he did not foresee a significant drop.
According to Strutt and Parker’s Farmland Database, the average price of arable land in England in the first quarter was down 3 per cent from December to £23,880/ha (£9,665/acre), but higher than the average in the first quarter of last year.
In Scotland specifically, the delay in Basic Payments and poorer commodity prices were having a bearing. Yet quality arable farms remained in short supply and were commanding a premium according to the firm’s Edinburgh office associate, James Butler.