A notable increase in farmland available for purchase in the second quarter of 2024 has created a more stable market, moving past the frenetic activity of the past two years.
With an increase in available land, buyers have regained some leverage, moderating the rate of land value growth, property consultancy Carter Jonas says.
An improvement in the weather meant that more launches could push ahead between April and June, bringing over 41,700 acres of new, publicly marketed land to the market.
Andrew Chandler, head of rural agency at Carter Jonas, says this represents a substantial increase compared to the same period in 2022 (34,900 acres) and in 2023 (32,800 acres).
When added to the new launches in the first quarter, the first half of the year saw a 24.9% increase in publicly marketed supply compared to the first half of 2023 (53,163 acres, against 42,578 in 2023).
“The frenetic activity fuelled by record low levels of supply 18-24 months ago has subsided and given way to a more stable market," he explains.
Although supply in the first half of the year was 38% above the five-year average for the same period, it was 7.6% lower than the 10-year average, indicating it is still falling short of historical norms. This has translated to strong longer-term land value growth.
Average arable land values in England and Wales held firm at £9,667/acre, while average pasture values increased by a marginal 0.4% to reach £7,833/acre.
From the start of 2024, average arable and pasture values have risen by 0.9% and 1.1% respectively.
“While growth has decelerated year-on-year, the trend remains positive,” says Mr Chandler. “Annually, average arable land values have risen by 1.6% and average pasture by 2.0%.
"This compares to 6.4% annual growth for arable land and 4.4% for pasture a year earlier, a period defined by a particularly tight market with very limited supply."
However, far from suggesting a downturn, Carter Jonas believes that the deceleration in growth is indicative of a well-balanced market.
While greater supply is creating more choice for buyers, and so tempering price growth, there is still a healthy level of interest driving activity.
Mr Chandler explains: “Commercial farming businesses, especially those who are largely cash-rich with less need for finance, remain a driving force in the market.
"This is complemented by a growing presence of natural capital buyers and the continued presence of rollover buyers who have utilised Business Asset Rollover Relief and are yet to reinvest in another asset.”
The election has been a keen talking point, but it didn’t disrupt market dynamics. Carter Jonas says it is hopeful that the industry will see a period of post-election stability after months of political instability.
“Labour has pledged its commitment to making the ELM scheme work and has not stated immediate intentions to change the tax regime. The industry can expect continuity rather than a major change in direction."
He adds: “While some economic concerns remain, positive signs are emerging. Inflation, as measured by CPI, aligned with the Bank of England’s 2% target rate in May, suggesting a more optimistic outlook.
"Although current interest rates remain a factor in business decisions about buying or selling, inflation is forecast to remain close to the 2%, paving the way for interest rates cuts in the near future.”
