The start of a new
year always brings with it an abundance of economic reports, outlooks and
projections on future demand, supply, prices and trends. This will be evident
across the entire property market including agricultural land over the next
number of months and with headline grabbing prices and broad averages it can
often be difficult to determine the real market fundamentals as to what is
actually happening.
In Jordan Auctioneers
our practice is primarily based in the Leinster Region and there are obvious
variations in the price of land from County to County. Applying an average rate
across an entire region can be very simplistic and although it can be referred
to as a benchmark the variations on same can be substantial. We see little
merit in recording marginal percentage increases or decreases as the market is
entirely unique to each property and overall sentiment / trends provides a more
useful insight into the sector.
2018 was a difficult
year to arrive at a market summary in terms of the land market. The season was
slow to commence due to a winter and spring that never seemed to end and this
pushed out land sales from the traditional starting time of March or April to
May & June as some land was simply not presentable. In addition to this the fodder crisis meant
both buyers and sellers were more focussed on day to day survival than making
key long term decisions.
Reflecting on the
year there were a number of extraordinary deals and prices achieved but
underneath this ran a trend of slow sales, reluctant purchasers and uncertainty.
Our experience in 2018 has shown us a number of factors effecting price and
interest levels;
§ Quantum and quality of land being offered remain key factors in any sale. Large
land holdings are more in demand than smaller parcels unless you have a number
of adjoining farmers who are looking to expand and willing to bid against each
other. Quality is always a key ingredient with land and considering the number
of bad winters and summers experienced in recent times selling poor or marginal
land is proving difficult.
§ Surrounding farmers – you need active farmers looking to expand their enterprise in an
area where land is being offered for sale unless the quantum is of such a scale
that purchasers might entirely relocate. We have noticed a considerable
variation in values from the stronger farming areas to the weaker regions and
this is even though the quality of offering is broadly comparable.
§ Limited interest from business people - the interest in land from the business community
has not rekindled to the level pre – Celtic Tiger. We believe this is largely a
result of the change in the general type of business person now financially
strong enough to purchase such an Asset. Traditionally many builders and
developers had come from farming enterprises albeit in some cases small
holdings but once their own business gathered momentum and they had spare funds
part of their desire was to buy a farm, go back to their roots as such. When
the market collapsed in the mid 2000’s many of these got into well publicised
difficulty and their companies were taken over, wound up and merged into other
entities.
The new
generation of CEO have been brought up on a different ethos; focus is on asset
return and commercial viability. The purchase of farmland never stacks on this
basis and the ‘love of the land’ does not carry the weight of old.
§ Dairy farmers
– the expansion of the dairy sector has been well documented and we have found
that when good quality land is offered for sale adjacent to a farmer who has
ambitions to expand they will generally try to deal whether this is at Auction
or on a Private Treaty basis. Some farmers have fragmented holdings which makes
handling stock difficult so when parcels come for sale adjacent to the main
yard / milking platform they will generally try to negotiate. In some instances
they have sold outfarms to facilitate the purchase.
§ Finance –
for the second year running we have experienced far more transactions being
dependent on finance to complete. Prior to this there seemed to be money which
perhaps had been hived away in the Celtic Tiger to buy land at a future date.
Up to 2016 80% of our land sales were cash based. In 2017 and 2018 we estimate
this percentage to be less than 40%.
Customers tell us that while bank lending has improved this is largely
to customers with very strong enterprises, low debt levels and with firm
business plans.
§ Tillage & Cattle farmers remain reluctant to buy land at present, partially
due to volatility in input prices, returns and uncertainty for the future. In
stronger tillage areas such as south Kildare the appetite still remains to
expand and many of the farms have been built over generations whereby existing
debt levels are low and this gives them the potential to raise the necessary
capital if required.
§
Outlook 2019:
‘Brexit’ – the final
countdown!
Nothing curtails
business in general more than uncertainty and unfortunately Brexit brings all
that. It is difficult to determine how the market will perform but clarity on
the major issue will provide a clearer pathway for people to make some
decisions. It is without doubt one of the biggest impacts to hang over the
market for some time as predictions on future viability of farming enterprises
will come to the fore now more than ever before with possible WTO tariffs
likely to impact the agricultural sector more than any other.
Obviously confidence within an industry is an important factor in
lands sales and prices but this is perhaps less so in Ireland than other
European Countries. In Ireland there are many other emotive and additional
factors that affect the price of land and serve to keep it at a relatively high
base value. One of these is obviously the limited supply of agricultural land
traded on a yearly basis (0.5% of total land area). An interesting statistic is
that the average field in Ireland gets sold once every 400 years outside of a
family compared to once every 70 years in France!
It is our general
opinion that while prices may be volatile there will still be trade. Farmers
remain hugely ambitious, prepared to work whatever hours needed to make ventures
viable but informed and sensible decision making is still a key ingredient for
success, now more than ever as we enter choppy waters.
Clive Kavanagh, MSCSI,
MRICS is a Director of Jordan Auctioneers & Chartered Surveyors who has
been involved in the
sale of agricultural land and country properties for the last 16 years and works
directly with Paddy Jordan. Clive can be contacted in the office on 045 –
433550 or clive@jordancs.ie
