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UK farmland market sees east/west divide open up
An east/west divide in value growth for farmland in the UK has opened up in what has been a mixed year for sector, according to a new analysis report. Indeed, 2015 was a year of change across the farmland markets as, for the first time in a decade, price falls in arable land values were recorded in the eastern counties of England, the Savills Farmland Value Survey shows. Grassland values, generally in the west, which have lagged behind arable values, have continued to increase and this has created an east/west divide and also mirrors the contrasting supply dynamics, as noted on Supply and Demand 2015, which has also been a contributory factor to supporting values in the west. Farmers made up 50% of farmland sellers last year, the highest proportion in seven years as low commodity prices and the short term outlook for UK agriculture prompted some to capitalise on high average land values and retire. The report points out that farmers made up the smallest proportion of buyers since 2003 at 43% of all transactions. Meanwhile, non-farmers including lifestyle buyers, investors and institutional/corporate buyers represented the biggest percentage of purchasers in the past 12 years. Expansion of an existing holding was the principal motivation to buy, representing the predominant reason in more than half of all transactions, with three quarters of those farmers who took on more land citing expansion as the reason to buy. Just short of 176,500 acres of farmland were publicly marketed across Great Britain in 2015, an increase of 24%, or an additional 34,000 acres compared with 2014. Across England, market activity increased by 16% to around 120,000 acres with a clear divide between the eastern and western regions. Increased supply was recorded in the eastern regions, most notably in the East Midlands. In contrast, reduced supply was recorded down the western side of England. In Scotland market activity increased 47% in 2015, which may be the result of a combination of factors including pressure on farm incomes and some pent-up activity following a year of uncertainty caused by the Scottish Referendum. ‘In the light of recent market evidence, the short to medium term expectations for commodity prices and therefore farm profitability, we have downgraded our forecasts for the next five years. We expect values to be much more varied than in the past five years,’ said Alex Lawson, director of National Farms and Estates at Savills.. ‘Exceptional prices may still be achieved if all the right factors come together, but conversely it is very likely that there will be more farms where potential sale prices fail to reach expectations or they fail to sell. We expect this market will last three to four years until commodity prices start to recover, following stronger global growth,’ he explained. Continue reading
Irish property prices dipped slightly in January but growth set to continue in 2016
Residential property prices in Ireland are up 7.6% year on year but fell by 0.5% in January, according to the latest index figures to be published. The data from the Central Statistics Office shows that the annual growth of almost 8% compares with an increase of 6.6% in December and an increase of 15.5% recorded in the 12 months to January 2015. Month on month, January’s fall of 0.5% compares with an increase of 0.5% recorded in December and a decrease of 1.4% recorded in January of last year. A breakdown of the figures shows that in Dublin property prices decreased by 1.2% in January and were 3.4% higher than a year ago. Dublin house prices decreased by 1.1% in the month and were 3.2% higher compared to a year earlier while apartment prices were 4.8% higher when compared with the same month of 2015. Prices in the rest of Ireland rose by 0.1% in January compared with a decrease of 0.9% in January of last year. Prices were 11.4% higher than in January 2015. But prices are still some way below their peaks in 2007. For example in Dublin prices are 34.9% lower than at their highest level in early 2007. Apartments in Dublin are 41.8% lower than they were in February 2007 while house prices are 36.8% lower than at their highest level in February 2007. Prices in the rest of Ireland are 35.3% lower than their highest level in September 2007 and overall, the national index is 33.8% lower than its highest level in 2007. A lack of supply, particularly in Dublin has been pushing up prices, according to Alan McQuaid of Merrion Stockbrokers, and he expects price growth to be more modest over the next year or two. Investec economist Philip O’Sullivan pointed out that the market has been affected by new mortgage lending rules from the Central Bank introduced in February 2015 which restrict lending multiples and loan to values and he expects prices to keep growing once the impact has lessened. Demand is likely to strengthen and with supply increasing only slowly, prices are expected to pick up as the year progresses, although short term trends are likely to remain weak, according to Dermot O’Leary, chief economist with Goodbody Stockbrokers. Continue reading
Prime property country locations set to outperform London, new analysis suggests
Country locations are set to outperform London as the prime property markets enter the next stage of the housing cycle, according to a new analysis report. Stamp duty changes introduced in the 2014 autumn Statement have had a bigger impact than many forecast, the effect initially being masked by the uncertainty in the run up to the General Election, according to the report from property firm Savills. However, it points out that both the prime housing markets of London and the country have reacted relatively rationally to the changes. Indeed, small price falls were recorded in the higher value markets where the stamp duty liability has increased but by contrast, in the lower value prime markets where there is now a tax saving, values have continued to rise, albeit at a slower rate than in 2014. The challenges faced by the prime markets of late are reflected by the fact that the total value of housing stock in Kensington and Chelsea fell in 2015, though the loss of £693 million is dwarfed by the gains of £68 billion over the preceding 10 years, the report explains. Transaction levels, though undoubtedly lower than in 2014, have not collapsed as some would argue. Figures from the Land Registry indicate a 5 to 10% fall above £1 million across England and Wales. ‘While this suggests there is still a market for appropriately priced stock, it also means we are unlikely to see cuts to rates of stamp duty at the top end,’ said Sophie chick of Savills research team. ‘Indeed, in the 2015 autumn Statement, more stamp duty changes were announced for buyers of additional homes (second homes and buy to let) causing further small price falls in markets with high concentrations of such buyers in the last quarter of last year,’ she explained. Chick pointed out that to understand what lies ahead it is helpful to look back and identify what happened between 2002 and 2005 when the market was at a similar stage in the housing cycle. ‘In prime London, over the three and a half year period from June 2002, prices increased by just 5%. Currently, average values have seen no net growth since the first quarter of 2014, so if the market follows a similar trend we would expect prime London values to remain broadly flat through 2016 and most of 2017,’ she said. ‘Over the same period, prices in the prime country markets outperformed London with an average increase of 17%. We expect a similar trend this time round as the ripple effect took hold and more equity flows to the housing markets beyond London,’ she explained. The analysis shows that in terms of how residential value is concentrated, Kensington and Chelsea sits far ahead of any other borough or local authority across the UK, not just by virtue of high property prices but also the relative density of housing in the borough. The combination of the two means that on average in… Continue reading
