Agricultural land will hold value (From Smallholder)

Agricultural land will hold value

7:44pm Wednesday 18th March 2009

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AS the property market continues its decline and residential development land values plummet, agricultural land ended 2008 up 21.5% on the previous year, demonstrating its relative resilience to recessionary forces.

Analysis by Savills, tracking values back to 1970, clearly shows that agricultural land values are consistently more closely aligned to wheat prices than the broader economy.

After a period of volatility this year, wheat prices are expected to rise in 2009, thus providing a good cushion for agricultural land values.

advertisement The fourth quarter of 2008 has seen average farmland values across Britain fall by -4.4%, though the extremely strong growth in the first half of the year has kept most areas well into positive territory year on year. Five year growth at the year end stands at 135%.

The greatest quarterly falls were seen in the Eastern and Northern regions (falling -6.6% and -5.7% respectively) and Wales (-5.5%). Scotland, whilst recording one of the smallest quarterly falls (-3.0%) ended the year just 5.6% up year on year, making it the region with the lowest annual growth. Prime dairy land topped the growth table, +32.2% year on year, with average quality arable land at the bottom of the table, registering +15.9% growth. On a quarterly basis, poor quality livestock land fell by -9.4% but still ended the year 18.2% up on 2007.

Ian Bailey, head of rural research at Savills, comments: "On any other investment measure a growth of +15.9%, particularly in this year of unprecedented volatility, would be a great performance.

"Our outlook for wheat, the main determinant in setting overall land values, is bullish for 2009. We therefore confidently expect that agricultural land will be well-placed to defy, in large part, the downward recessionary pressures."

Savills forecasts that average values will remain stable though 2009, at worst softening slightly (-5%), with a more positive outlook for the second half of the year. However, a two-tier market is expected to become more apparent, with the best market being for good quality, well-equipped land in a good location, especially good commercial arable land and the very best estates. Poor quality land, in poor locations, will be difficult to sell and will see the greatest downward pressure on values.

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