Chalmers & Co predicts the market for farmland will stay bouyant.

This article appeared in the Focus on Farming feature in the East Lothian Courier on 9th March 2012.

In contrast to the lacklustre residential and commercial property markets, agricultural land values have held up from the sharp increases of the last two years, according to Chalmers & Co, the East Lothian rural land managers and chartered surveyors.

Buoyant cereal, oilseed rape and livestock prices have been a much welcomed boost to farm incomes over the last two years, though margins remain tight as outputs have been tracked by the cost of inputs.  This has led to a sense of heightened risk, nevertheless, Carpe Diem (Seize the Day!) comes from the lips of Chalmers & Co surveyors to invest, believing this to be a window of opportunity.

Expansion is often preferred but the scarcity of productive agricultural land on the market, fuelled by the tax advantages of holding agricultural land, is causing many agents to believe the market for farmland will stay buoyant. A leading agent is predicting a 5% rise across the UK during 2012, forecasting that UK land prices will increase by 36% over the next 5 years – out-performing residential property, many commodity markets and UK gilts.

Farm rents are on the rise as well after a period of relative stagnation, growing by over 20% since 2007.  Settlement over the long-running Moonzie case involving a farm rent review in Fife taken to the Land Court brings to an end some of the uncertainty at reviews and will no doubt also lead to rent increases in the future as the implications are taken account of. A decision over the appeal against the Land Court ruling in the Salvesen v Riddell case also is also keenly awaited and could prove a turning point for the letting of land.

Francis Ogilvy, owner of Chalmers & Co which provides rural land management services in East Lothian, Midlothian and the Borders, comments:

“Whatever the outcome of the legal issues in the tenanted sector, good landlord and tenant relationships and a willingness to open up to new forms of partnership opens up opportunities for shared investment and shared rewards. Innovation in partnerships was a recommendation well made by Arable Farmer of the Year, Colin McGregor, recently in his ‘How I Farm’ talk given to the Agricultural Discussion Society.

“The three-yearly rent review process can be used constructively to stir the pot a little to seize available opportunities for mutual benefit. Diversification from traditional agriculture or land and building re-organisation can form part of an effective tenancy appraisal. This, however, can be a complex area and good professional advice is recommended.

“Headline rental figures are not necessarily helpful, belying special circumstances, however arable rents of around £70 per acre are now looking on the low side with evidence also of the livestock sector offering competitive rents to formerly arable rates. Giddy prices are being paid for purchasing land too, but notwithstanding long-term trends, the price of land still bears little relationship to its productive capacity unless multiple reasons exist for purchase. It begs the question why more land is not coming onto the market from farmers looking to retire, especially since the ability to attract farmland support in future looks likely to be linked to active rather than passive farming.”

Picking up on the opportunities, Sarah Rock-Evans, a valuer at Chalmers & Co points out how some have presented themselves from apparent natural disasters:

“Insurance payments as a result of snow damage last year and gales this winter have raised demand for new buildings and opened up discussions amongst neighbours to consider sharing new buildings. The added impetus to this can be consideration of a new lease of life for older buildings less suited to modern agriculture.  Some have chosen to use the SIPP scheme for channelling investment and we have been asked for a number of valuations to provide security for these in recent months.”

Chalmers & Co advises clients on buying, selling and renting land in the Lothians and Borders.  Please contact Francis Ogilvy or Sarah Rock-Evans on 01620 824000 to discuss your requirements.