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Farm prices will rise 5% as land values continue to rise and compensate for falls in farmhouse values and farms with houses and cottages will be harder to sell as buyers expect residential values to fall further. Those are the principle predictions for 2009 from Smiths Gore.
A number of major economic factors are affecting the farmland market, says Smiths Gore partner and head of research Dr Jason Beedell. For starters, the farmland and residential markets can not be viewed in isolation. Almost 70% of farms sold have houses or buildings and so their value is affected by changes in the housing market. House prices will fall further and may not start to rise or even stabilise until 2010 or 2011. Beedell says, however, that balancing this are two positive factors that should make bare land values continue to rise – farmers’ and banks’ optimism. Bare land prices have not, to date, been affected by the residential market, the credit crunch or the wider economic downturn. The reason for this is that many farmers are still optimistic about the core business of farming, although less so than in Spring 2008 before commodity prices fell. This should not change and lending to farming for agricultural land purchases should continue. Banks and other lenders still view farming as a secure, well capitalised sector. There will be fewer sales in spring 2009 as buyers wait for commodity prices to start rising. There is already strong evidence of farms remaining unsold on the market and asking prices being reduced. Yet Beedell expects more land to be sold in 2009 than in most recent years, although less than in 2008 which was a recent high. Prices, predicts the firm, will rise by 5% in 2009 as they return to their long-term upward trend. The short-term fall in prices in 2008 will be caught up within a few years and will be back to 2008 levels during 2011. |
Rural agency 
