Sunday, October 08, 2017

Farmers don't drive land prices

It is often claimed that Brexit will bring down the price of farmland and make life easier for new entrants. However, according to Strutt & Parker, lifestyle buyers and tax-savvy investors are about to overtake farmers as the primary buyers of agricultural land. This conclusion is based on an analysis of every public sale of over 100 acres since 1996.

Farmers bought 68 per cent of the holdings for sale in 1998 but they bought over 51 per cent of those sold in the first six months of this year. Private investors have increased from 4 per cent of buyers in 1998 to 20 per cent this year. Lifestyle buyers have stayed largely constant at 25 per cent of sales [most of these sales in England are within reasonable travelling distance of London]. Overseas and institutional investors fluctuated around 4 per cent combined.

Stamp duty is capped at 5 per cent when a country house comes with land, otherwise a mansion is liable for up to 12 per cent. Agricultural land is also exempt from inheritance tax.

Sir James Dyson, who bought 33,000 acres (of admittedly good quality land) in Lincolnshire, Oxfordshire and Gloucestershire, is believed to have paid £15,000 an acre in 2013. Average prices peaked at £10,100 in acre in 2015 and, because of many years of poor prices and Brexit uncertainties, have dropped to around £9,600 an acre.

James Beedell, head of research at Strutt & Parker, said that investors have turned to farmland after the 2008 financial crisis because they wanted something safe. 'Lifestyle buyers and investors set prices because what they are prepared to pay for land isn't necessarily related to the profit it can produce.'

If there is a fall in land prices in Brexit, it could lead to greater consolidation as those with capital or access to it buy up smaller farms. Some think that would lead to productivity gains, others that it would have an adverse effect on rural communities and landscapes.

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