Sharp fall in demand for rural land

The Royal Institution of Chartered Surveyors (RICS) has reported a significant drop in demand for rural land in H1 2016, and with supply continuing to increase, expectations have been pushed further into negative territory.

According to RICS research, 49% of contributors now expect prices to fall across all farm types over the coming year. Anecdotal evidence from respondents suggests that several factors are combining to dampen sentiment in the market which include increased uncertainty due to the EU Referendum, subsequent confusion over the future of CAP payments and low commodity prices.

Commercial farmland has seen the worst of the current downturn with demand falling most substantially in this sector (net balance of -48%) but residential farmland also saw a sharp drop in buyer interest in H1 with 19% more contributors reporting a fall rather than a rise.

Looking ahead, the RICS believes change is unlikely in the next 12 months, with expectations for commercial farmland over the coming year firmly in negative territory (56% of respondents expect a further decline in prices). The outlook for mixed residential land has also turned visibly negative in H1 with a net balance of 42% of surveyors expecting prices to fall rather than rise over the next year.

According to the survey’s transaction-based measure, average farmland prices edged down in the latest period and now stand at £10,750 per acre. Meanwhile, the survey’s opinion-based measure (a hypothetical estimate by surveyors of the price of bare land) fell by 4% between H1 2016 and H2 last year.