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Subsidy promise helps UK land prices 'stabilise', after two-year decline

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A promise to maintain farm subsidies post-Brexit, until 2022, combined with limited supplies for sale, has provoked ideas of an end to a two-year drop in UK land prices – for arable farms, at least.

Land agency Strutt & Parker on Thursday pegged at £8,400 per acre the average price of arable land in the April-to-June quarter England, which accounts for the vast majority of UK farms.

This is "around the same level as seen during the first three months" of 2017, said Michael Fiddes, head of estates and farm agency for Strutt & Parker, adding that values appear "to be levelling out after two years of gradual decline.

"There can be a wide range in prices paid, but the majority of [arable] land sold is in the £8,000–£10,000 acre price bracket, with most of this at the lower end of the range."

'The right product…'

The comments follow research from Knight Frank earlier this week showing all-farmland prices in England and Wales down 1.7%, quarter on quarter, in the April-to-June period, at £7,313 an acre.

This fall represented a seventh successive decline in values, from a high of £8,306 an acre in September 2015.

However, Andrew Shirley, Knight Frank head of rural research, flagged that the fall in the headline price disguised a two-tier market in which arable farm values are outperforming.

"On the evidence of recent sales in southern and central England, the value of good quality arable land has started to rebound," Mr Shirley said, citing some sales at close to £10,000 an acre.

"Although this is some way off the values being paid at the height of the market in mid-2015, it suggests that demand remains strong for the right product."

Subsidy promise

Both Strutt & Parker and Knight Frank flagged as a help to prices a promise by Michael Gove, the environment and agriculture secretary, to maintain UK agricultural subsidies at European Union levels until the end of the current parliament, likely in 2022, when the country should have left the bloc.

"While Brexit has caused uncertainty, some farmers have been reassured by the promise that subsidies will continue until at least 2022," Strutt & Parker's Michael Fiddes said.

The land agencies too flagged the role of higher farm commodity prices, which have been lifted by sterling weakness, and the drop in the currency stemming from last year's Brexit vote.

"Helped by the ongoing weakness of sterling, the value of the main agricultural commodities like wheat and beef continues to edge up, which makes farmers feel more confident," Knight Frank's Andrew Shirley said.

'Not much for sale'

However, Mr Shirley added that "perhaps most importantly, there is still not that much farmland for sale," with the area being publicly marketed stable year on year.

"At the same time there is still a wide variety of potential buyers looking for land, either farmers seeking to expand, investors hunting for long-term secure assets, or rollover-driven purchasers."

Mr Fiddes said that while more land has come onto the market, after a "slow" start to 2017, the area remained around five-year average levels.

"At this point, there are no indications that more farmers are planning to sell this autumn, which would accelerate the amount of land coming onto the market," he added.

By Mike Verdin

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