Mar 01 2017 02:01:00
Despite some downward pressure (-5 per cent) on average farmland values over the past two years, the overall value of UK farmland during the past 10 years has increased by 149 per cent. Barring any major economic or fiscal changes, we do not anticipate significant price rises or falls in the short to medium term and are forecasting overall average growth of 5.5 per cent for the next five years followed by sustained, steady growth in the longer term.
Our forecasts for the next five years (see table, below) are derived with the output of our ‘Farmland Value Model’ which tracks the drivers of farmland values back to 1975 – soon after we joined the EEC.
The weighted model takes into account the key variables that can affect price such as farm incomes, wheat price and yield, subsidies, prime country house values and the previous year’s farmland values adjusting for any ‘lag’ effect. In addition, our forecasts are calculated with a thorough understanding of how supply and demand influences the market.
The average value of farmland across the UK is likely to remain under some pressure in the short term due to low commodity prices despite the fall in input costs and increased subsidy receipts due to the weak value of sterling. This short-term price pressure will be tempered by a continued low supply which will also help to underpin prices in the medium to long term.
In addition, we expect an increasing amount of cash from Capital Gains Tax rollover relief as development activity increases and a general economic improvement in the medium term to support demand for farmland and therefore prices in 2020 and 2021 despite the uncertainty surrounding the detail of a new UK Agricultural Policy.