Land prices set to plateau
The value of farm land is set to plateau according to head of research for Carter Jonas, Catherine Penman, who is based in the firms Midlands office in Northampton.
Analysis in the company’s recently published Agricultural Investment Indicator has unleashed some unexpected results when it comes to forecasting land values, with the only factor supporting land prices and keeping them buoyant being the scarcity of agricultural land itself.
“Agricultural property is unlike any other asset,” explained Catherine. “There is no clear link between the production factors and investment value – the market is shaped by a spectrum of social, economic, political and even environmental factors.”
The indicator, which was launched at the end of August, is available free of charge from the Carter Jonas website (www.carterjonas.co.uk) and illustrates how the supply of land in the market has been steadily dropping since the late 1940s with the correlation of supply to price crossing paths in 1994, since when land prices have climbed steadily from £1,500 to £6,000 per acre in the current market.
“The indicator shows that farmers are selling their produce at, and in some cases below cost, and are consequently increasingly relying on subsidies for their profits. Cereal prices peaked in mid 2008 and have followed a downward trend since, despite the recent sharp hike following this year’s severe drought in Russia.” explained Catherine. “In contrast, land prices have continued to rise although at a gentler rate than the steep climb in the five year period from mid 2003 to mid 2008.”
Philip Cowen, who leads the rural team for Carter Jonas in the East Midlands was not surprised by the findings and added:“With rising costs for farmers and fluctuating crop prices, growth in the demand for land within the farming sector is unlikely to drive the market in the short to medium term. The continuing uncertainty about the future direction of the Common Agricultural Policy after 2012 is not helping farmers to make long term strategic decisions for their businesses. I believe we are seeing an Indian summer in the land market, with potential sharp frosts to follow. However I would not expect a cold winter unless public spending cuts cause serious damage to the economy.”
Posted by: Carter Jonas LLP
