According to the latest figures from the Office for National Statistics (ONS), agriculture was the only sector of the UK economy not to have shrunk in the final quarter of 2008. As reported in Knight Frank’s latest Rural Brief, gross domestic product (GDP) contracted by 1.5% in the last three months of 2008 more than double the 0.6% slide seen in the third quarter of the year whereas output from agriculture, forestry and fishing rose by 0.1%.
Andrew Shirley, head of rural land research at Knight Frank, outlines the background to a generally golden year for British farmland in 2008: ‘Values raced ahead during the first half of the year, as a mix of potential buyers vied for the limited amount of land available, and even while the residential and commercial markets were sliding, farmland remained buoyant. But by the end of the summer, cracks were starting to show.
Falling commodity prices and rising input costs combined with the credit crunch to stifle demand as investors, lifestyle buyers and farmers from the UK and abroad all withdrew from the market. And although values fell only slightly during the third quarter of the year, the final three months showed a more significant drop of 5%. Fortunately, the strong growth earlier in the year meant prices at year-end still finished 16% higher than at the end of 2007.’
This positive outlook is reinforced in Savills’ latest Agricultural Land Market Survey which suggests that farmland has proved as resilient as in the previous three recessions of the past 30 years those of the mid 1970s, early 1980s and early 1990s. Research head Ian Bailey points out that ‘along with gold, farmland has historically been one of the world’s principal defensive hedges in times of economic volatility, and although some pressure on values was recorded during previous recessions, the upward trend wasn’t stifled’. He believes that this will again be the case in 2009, with land prices dipping by up to 5% in the first half of 2009, but regaining lost ground in the second half of the year.
The supply of farmland or, rather, the lack of it is likely to be another key factor in maintaining land values, says Mark McAndrew of Strutt & Parker, whose firm handled sales of some 30,000 acres in England last year. He estimates that there are about 60,300 acres of farmland currently available on the market, compared with some 77,000 acres on offer at the same time last year. Although supply has dwindled, demand remains firm, but the buyer profile has shifted dramatically away from commercial investors and back to farmers and private investors. (Chesterton Humberts, for example, have already purchased two farms on behalf of the Braemar fund, which has announced its intention of adding several more major holdings to its portfolio in the course of the year.)
Finally, the reduction in interest rates is likely to increase demand for let farms, which have been somewhat overlooked in recent years because private investors considered yields of 2%, or less, to be unappealing. Not so now. With interest rates continuing to tumble, agricultural investments, with all their associated tax advantages, are likely to prove increasingly attractive to private investors looking for a safe haven for their money, Mr McAndrew concludes. With farmers and private investors set to dominate the farmland market at the expense of ‘lifestyle’ or ‘residential’ buyers in 2009, the relatively small but varied selection of farms currently being launched on the market is likely to arouse substantial interest among potential purchasers.
One fresh entry that could give the lie to the somewhat pessimistic prognostications for lifestyle farms is picturesque, 382-acre Coakham Farm at Crockham, near Edenbridge, Kent. For sale through Savills (01444 446066) at a guide price of £5 million for the whole, this ring-fenced, mainly grassland farm, in ‘a cracking location’ near commuter-friendly Edenbridge, has been in the hands of the same owners since the late 1980s. It includes a Grade II-listed, five-bedroom farmhouse with a two-bedroom annexe, a listed timber-framed barn with development potential, stabling, various farm buildings, two lodge cottages, 30 acres of woodland and an equestrian cross-country course.
Down in the West Country, Strutt & Parker in Exeter (01392 215631) have two early entrants to this year’s farming line-up. Trekennard Farm at Poundstock near Bude, Cornwall, is a picturesque, 203-acre coastal organic farm with a substantial, seven-bedroom farmhouse, a stone barn with planning consent for conversion, modern farm buildings and pony paddocks. It’s for sale by formal tender, as a whole or in 10 lots, with a deadline of Thursday March 19, and a guide price of £1.4m.
Meanwhile, Strutts quote a guide price of £1.35m for the ‘ideal starter dairy farm’, the 177-acre Blagrove Farm at East Worlington, near Crediton, Devon, which has a nearly new, three-to four-bedroom farmhouse, a well-equipped, 150-cow dairy unit, a calf-rearing unit, and 28,000sq ft of farm buildings.
The sting in the tail of last year’s market for commercial farmland left its mark on scenic, 478-acre Home Farm at Shirenewton, Monmouthshire, which failed to sell at the original £3m guide price quoted last summer by selling agents Knight Frank (01432 273087) and David James (01454 320144). It comprises an ‘exceptional’ block of arable land, grassland and mature woodland, with a general-purpose farm building and a derelict gamekeeper’s cottage and folly on the site of historic Dinham Castle, in glorious rolling countryside near Chepstow. However, a revised guide price of £2.5m has aroused fresh interest in recent weeks, Claire Duthie of Knight Frank reports.