RICS’ rural land survey for the fourth quarter of 2004 reveals that it saw an increase of farmers moving back into the market as their CAP entitlement becomes clearer.
Prices show a further rise but at a slower rate, up by 25% in Q4 of 2004 compared to 29% in Q3, due to strong demand, while the availability of farmland property fell again.
Surveyors believe that ongoing concerns over the Single Farm Payment continue to deter potential sellers from the market.
Demand for farmland moderated at the end of 2004 but remains firm.
Market conditions continue to be strongest for commercial farms showing a build-up of interest from farmers encouraged by higher incomes and a greater certainty over CAP reforms.
Successive interest rate rises have contributed to a slowdown in the demand for mainly residential farms, although RICS finds no signs of a collapse.
RICS’ report indicates that the share of purchases by ‘lifestyle buyers’ of farmland has declined, while more farmers are moving back into the market.
This is a result of rising borrowing costs restricting the number of farmland sales to non-farmer buyers, who now account for only 41% of the market, compared to a peak of 51% last year.
Meanwhile, farmland sales to individual farmers have risen to 45%, up from 38% last year.
Julian Sayers, spokeswoman for RICS, says: “Despite the further decline of farmland availability, supply conditions are expected to improve as the implications of the Single Farm Payment are clarified.
“Both increased caution from non-farmer buyers and expectations for better availability in 2005 have led surveyors to believe that commercial and residential farmland property prices will flatten out over
the coming year.”
Farmland prices in 2004 rose by 25%, compared to just 7% in 2003, the largest increase since 1994. However, the number of sales in 2004 has fallen by 43% over the past two years.