Time may be right for farmers to offload land before bubble bursts

Farming correspondent

Monday 18 March 2013

Leading land agent Charles Dudgeon, of Savills, recently advised those farmers thinking of selling up that now might be as good a time as any.

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Farming comment ROG WOOD

According to him: "Since the downturn in 2007, land has outperformed the residential market, gold market and wheat prices."

There has been a 115% increase in the value of Scottish farmland in seven years. Prime arable land fetches £7500 per acre, secondary arable land is worth between £4500 and £7000, while silage ground – pastureland that can be ploughed – is now £2500 to £4000, and permanent pasture sells for between £1500 and £3000 per acre.

Mr Dudgeon said: "Any farmer who does not have the stomach to face more volatility, or the challenge of being farm-worker, marketing manager, accountant, shepherd, businessman etc, etc might conclude that land prices have had a very good run, and now is a good time to sell and realise growth."He added: "In real terms we're still not quite as high as we were in the 70s, suggesting there is room for more growth." That may be so, but as with the housing market, nobody can ever predict when a bubble is going to burst. 1952-1958 saw prices for farmland with vacant possession stable at around £80 per acre. During the 1960s values rose to just over £200 per acre and accelerated to over £1300 per acre by 1980. This rapid growth was dampened a little in 1973 and 1974 when inflation topped 24% and interest rates reached 12%.1972 had seen a remarkable boom in land prices; it was a historic year, which exploded upon an unsuspecting farming and business community.The reasons were complex: a sagging economy, falling share prices, the optimism of the Common Market, and a general fever which always grips uncontrollable booms – very similar to recent years.Alistair MacGregor wrote in the Farmers Weekly issue of October 6, 1972: "The past decade has seen fashion in investment dodge from mining shares to furniture, to oil companies to silver, to office property to pictures. Now it happens to be land."John Cherrington wrote about the same time: "Rich investors are not particularly clever men. They usually follow trends, and the trend is towards something safe with a good record and no labour troubles. Land fills the bill rather better than gold because it carries the added bonus of Estate Duty Relief." The same sentiments hold true today.Peter Thumper, a leading land surveyor speaking in 1973, observed: "As every sailor knows, there are always signs before a storm – it is interesting, that the 1972 boom in land prices came as a surprise to almost, if not absolutely, everybody. Certainly I do not think I have met, or heard of, anyone who foresaw it, even among the brilliant takeover tycoons."Just as the boom in land prices of the early 1970s was not foreseen, neither was the recent one. Those windfall boosts to the capital base of land-owning farm business in recent years has been welcomed by farmers, and those bankers who were nervously supporting the less-than-well-established.Nevertheless there is a downside. New entrants find it almost impossible to get a foothold in the industry because, with few willing to sell, farmland has become too expensive.Rents have also become inflated as landlords withhold precious land from the letting market when rented farms become vacant. That acute shortage of land to let is forcing up rents to levels that only established farmers looking to spread their costs can justify.As land reform activist Andy Wightman told the Scottish Agricultural Arbiters and Valuers Association AGM: "It's very difficult to get into an industry where so many assets are held for speculative purposes. We need to do something about Scottish land and whose hands it is in."According to him, about half of the privately-owned rural land in Scotland is owned by 343 landowners in estates of 700 acres and larger, while around two-thirds is owned by 1252 landowners in estates of 1200 acres and more.He added: "The pattern of landownership remains problematic. If we want to create a wealthier and fairer society, it is vital the land is held more widely."

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Time may be right for farmers to offload land before bubble bursts

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