Why the price of farmland is set to climb again in 2023
House prices have fallen for five straight months, but farmland and forest land prices are likely to buck the trend, according to the latest analyses. Penny Churchill and James Fisher take a look.
Farmland has long been viewed as a solid long-term investment and with the average price of farmland in England now being £10,000 or more per acre, demand has spilled over to lower quality farmland, driving grazing costs to record levels. Last week Savills predicted that land for agriculture, renewable energy and forest would be the “top picks” for buyers and sellers in 2023.
Why? Well, supply remains comparatively low and demand remains high, with the focus on “nature-based solutions” driving the market. Of all types of farmland, Savills has selected “lower quality pastureland” as a top rural investment target, with the value of this type of farmland increasing by 20% since December 2020. Demand will continue for the next five years as “pressure to recarbonize and restore land increases”.
Lack of supply means the value of commercial forest land – which has risen sharply in recent years – will continue to rise, Savills says, but not at the rates previously observed. Forestry markets are now maturing with prospects for capital growth becoming more dependent on timber prices.
“Under current law, land that qualifies for agricultural property relief can be gifted without incurring capital gains taxes — a highly efficient way of passing wealth on to children.”
Although much of the increase in farm and forest land prices has been attributed to the arrival of the big institutions rushing to buff their green credentials, private wealth is another key player in the market.
“It’s not just the super-rich,” says Rob Fanshawe of buying agent Property Vision, who points out that owning farmland has brought some invaluable tax benefits since the 1975 Treasury Act. The most prominent of these is the Agricultural Property Benefit (APR), which provides an exemption from inheritance tax not only for agricultural land but also for buildings and farms actively used by the owner for agricultural purposes. Under current legislation, land that qualifies for APR can be gifted without incurring Capital Gains Tax (CGT), making it a highly efficient way to pass wealth on to children or other family members.
Although the number of farmers in England is shrinking rapidly (one in five has left the sector in the last 10 years), there is still time for the smaller investor to reap the benefits of farmland ownership, says Mr Fanshawe, who has a minimum of 200 hectares as a sensible first purchase.
This coincides squarely with the sale by the executor of Garners Sevenex Farms in Great Missenden, Buckinghamshire, a residential and farming business within the Chilterns AONB, which went on the market through Savills Farms and Estates last week. Sales agent Louisa Batterbury has put a guide price of £7.75million for the late John Garner’s 247-acre farming venture as a whole or in up to six properties.
Lot 1, Andlows Farm, includes Andlows Farmhouse, traditional and modern outbuildings, two cottages and 69 acres of farmland, pasture and woodland at a guide price of £3.975 million. Lot 2 comprises 73 acres of farmland, pasture and woodland, guide price £850,000. Lot 3, Nairdwood Farm, comprises Nairdwood Farm Cottage, traditional and modern farm buildings and 50 acres of bare arable land, guide price £1.25m.
Lot 4, Broom Barn Land, comprises 49 acres of bare farmland, guide price £625,000. Lot 5 is a two bedroom house in Prestwood with potential for an additional location, guide price £600,000. Lot 6 is a three bedroom cottage in Prestwood, guide price £450,000.