Farmland values in England are falling at the fastest rate in 12 years, but markets stabilised, a little ahead of the UK vote on Brexit.
English farmland values fell by 1.7% in the April to June period. This leaves farmland values down 6% over the past twelve months, the fastest decline since 2004.
Estate agent Knight Frank said prices were likely to remain “steady” in the wake of the UK referendum, but warned that long-term prospects depended on what decisions are made on farm subsidie.
Pace of decline slows
But the pace of the drop is easing, with the drop in values slower than in the first three months of the year, when values dropped 3.0%.
And farmland values are still up some 160% over the past 10 years, Knight Frank said.
This means that farmland has improved even more than top-end residential property in central London, up 98% over the period.
The vote by the UK to leave the European Union, which came in late June, raises risks for UK farm values.
Noting that the agriculture sector is the biggest recipient of EU funding, with many UK farmers reliant on subsidies to break even, Knight Franl said “it might have been expected that the Brexit vote would have had a bigger effect on prices”.
“Prices should remain steady for the rest of the year, but looking further forward it is harder to judge where they will head,” Knight Frank said.
“Much will depend on the outcome of the UK’s trade negotiations with the EU and the rest of the world, as well as how the government decides to replace [EU farm subsidies].”
If subsidies are cut, farmers could be forced into selling unprofitable businesses, suppressing values.
But the estate agent saw reasons to be positive.
“According to polls, a majority of farmers backed, Brexit so the sector will not be unduly pessimistic following the referendum,” Knight Frank said.
And the slide in sterling in the wake of the Brexit vote could be supportive as well, making UK farmland more attractive to overseas investors, given farmland’s safe-haven status.
“The slide in sterling has also had an immediate upward effect on wheat prices and will help livestock exports,” Knight Frank said.
Front-month wheat futures in London are up some 8% from the day of the referendum, at £124.00 a tonne.
“A new round of potential quantitative easing currently being mooted by a number of central banks could accentuate this trend,” Knight Frank said.
(Source – http://www.agrimoney.com/news/english-land-values-to-stabilise—after-biggest-fall-in-at-least-12-years–9736.html)