The proportion of British farmland sales prompted by debt
worries has risen to its highest in 17 years, when base interest rates
were 20 times current levels, said Savills.
More than 20% of farmland vendors last year said that debt concerns were
behind their sale, up from some 13% in 2012, the property consultancy said.
This was the highest proportion since 1996, when the base
rate was 10% - compared with the current record low of 0.5%.
"There has been a bit of pressure [on farmers] in the past
year," said Ian Bailey, head of Savills' rural research department.
"There were not good crops back in 2012," thanks to persistent
rains which affected autumn sowings for last year's harvest too, which for
wheat was the smallest in 12 years.
Some farmers with heavy borrowings "perhaps found cash flow
problems", he said.
However, many of the debt problems were related non-agricultural
businesses hurt by the poor economic climate, and which vendors supported by
"There was evidence of non-farmers with off-farm business
interests seeking to release capital," Savills said.
"Some sellers saw an opportunity to sell at an attractive
price, to provide aid for a business outside farming," Mr Bailey told Agrimoney.com.
Before the flood
The comments follow the wettest January on record in large areas
of southern Britain, leaving some farmland under water for weeks.
"I do not know whether the floods will make any difference
to the market in any way," he said, if adding that any impact would not be
known for some months.
Any they follow evidence of deteriorating agricultural sector credit conditions in
the US, where the farmland market is slowing after a decade of dramatic appreciation.
Values felling last year in Iowa, the top corn and soybean producing
state, for the first time since 1998, undermined by drought as well as pressure
from lower crop prices.
Land vs shares vs
Savills stood by expectations that average British farmland
prices will rise by an average of 6.0% this year, supported by a continued
squeeze on the amount of land coming up for sale – at some 0.25% of acreage per
annum, compared with historic rates of 2.5%.
Indeed, Mr Bailey noted that while the British market has "seen
slight corrections, it is not like equities or the residential market", which
have histories of large retreats.
"It can pause, but then powers up again."
He added that the market performance this year was likely to
vary significantly between farms of different grades, with the best land,
attractive to funds, set for 8.0% growth, while poorer quality sites,
attracting fewer bidders, appreciates by 3.0%.