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Why Brexit uncertainty is affecting the price of farmland

Written by: John Padgett on Monday 29/05/2017

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Amidst the political and economic uncertainty which has prevailed in the UK since the referendum in June, one commercial sector has been impacted more than most. We take a look at how the price of farmland has been affected and ask whether it is a good opportunity for investors.

Falling prices

Here in the UK we’re lucky enough to be able to grow around 60% of the food our population needs, and agricultural land comprises almost 17.2 million hectares. However, farmers are increasingly under financial pressure due to a fall in commodity prices, the threat of a rise in interest rates as well as the uncertainty about future agricultural subsidies in the wake of the Brexit vote.

This has led to a decline in the value of farmland in some areas of the country. The South East and East of England saw falls of between -2.5% to -3% during the third quarter of 2106 which, combined with falls from earlier in the year, means that the total fall is between -3.6% and -7% for arable land specifically. This contrasts markedly with a 180% rise in average values over the last decade.

The average price of an acre of prime arable land in the whole of Great Britain is now £9,260, down -2.3%. In England it fell by – 2.5% to £9,360 per acre. In Scotland and Wales the price remained the same as the previous year at £7,940 and £7,500 respectively.

Supply

In Great Britain as a whole during 2016, there was a 3% increase in the amount of farmland available to buy, compared to the previous year. England saw a 1% decline, Scotland’s available farmland rose by 4% but it is in Wales that the most dramatic change has been seen. The Principality saw an increase of 43% in the amount of farmland being marketed for sale during this year.

Investment opportunities

For those looking to invest in farmland, it may be a good time to do so. Some farmers are genuinely suffering from the low price of the goods they sell and many others have faced delays in the payments they receive from the EU’s Common Agricultural Policy (CAP). In these circumstances, many wish to sell and are negotiating Farm Business Tenancies (FBT) on three-to-five year bases. This proves to be an attractive proposition for investors who can take advantage of lower-than-open-market values.

If you’re interested in diversifying your portfolio by investing in farmland, contact a member of our team today. Our experts can source a variety of farmland businesses throughout the UK and can offer advice and information regarding ROI expectations.

Written by: John Padgett on Monday 29/05/2017

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