According to the latest research by Savills, the supply of farmland coming to the UK market is increasing along with values, a trend it predicts will continue for the next few years. Andrew Teanby, associate director for Savills rural research said, “Farmland supply is increasing because of changes largely driven by the agricultural transition. Our research into the number of machinery sales would seem to support this.”
Although the number of institutional buyers has increased, 46 per cent of sales were to farmers in 2023, with average grade 3 farmland expected to increase in value by 2.5 per cent across Great Britain.
‘The beauty of land is its flexibility, which means it appeals to different types of buyers with a range of objectives,’ explained Savills. ‘Farmers and lifestyle buyers are the two largest groups and the proportion of purchases they make changes each year according to their relative prospects. When farm incomes declined in the early 2000s, farmers were less likely to be purchasers, but they succeeded in a higher proportion of transactions when the global financial crisis impacted lifestyle buyers later that decade.’
It added that despite some challenging sectors and a difficult financial year for many, many farmers remain positive. ‘After taking into account all the changes to payments, regulations and schemes, 39% of farmers are positive about their future in farming according to Defra’s April 2023 Farmer Opinion Tracker. Around a fifth said they were planning to expand their business. Provided it is within their financial means, demand for farmland from neighbouring farmers will continue to be strong because local opportunities to expand are rare – less than 0.5% of farmland is publicly traded in any given year.’
Savills forecast ‘that growth in farmland values will be modest.’ It continues, ‘There is now a general expectation that the base rate will be “higher for longer” and not return to the lows of the last decade. So economic challenges will weaken demand at the same time as agricultural policy is driving changes within the industry that are leading to the amount of farmland being offered for sale increasing more rapidly than we anticipated last year. As a result, we have revised our forecasts downwards.’
Another indicator is that there were 71% more machinery sales in 2023 than in 2015. Mr Teanby added, “Using the rise in machinery sales as an indicator we remain confident that more land will come onto the market. The sale of farmland is one potential outcome following a change in farming system/activity, tenancy surrender or retirement.”
In particular, the demand for prime arable land, where the main purpose is food production, is expected to remain strong, with average values forecast to increase by 3 per cent per annum over the next five years.