Post-Brexit subsidy plans could exacerbate property trends which see quality land attracting strong bids and less productive land struggling to sell.
The Government’s announcement direct payments will be phased out meant it was unlikely there would be a glut of land for sale as the UK leaves the EU.
But the two-tier market was likely to get ‘gradually more pronounced’ as buyers look for the most productive land or to maximise public goods payments.
According to the Knight Frank farmland index for the third quarter, the average value of bare agricultural land in England and Wales dipped by 1.8 per cent, meaning prices had dropped 4 per cent over the past 12 months to an average £2,851/hectare (£7,045/acre).
And buyers were seeing no reason to rush into purchases, as Brexit uncertainty continued to weight heavy on the market.
The future of the EU’s future trade relationship with the UK was also a concern, with serious short-term implications for farming from a no-deal outcome.
Andrew Shirley, head of rural research at Knight Frank, highlighted there were factors outside the industry which influenced the market.
“Rollover buyers are still extremely active,” he added.
And English buyers were active in Scottish markets looking to reinvest rollover funds from housing developments.
UK land was looking ‘relatively cheap’ by European standards and Mr Shirley suggested its reputation as a safe haven in times of political and economic uncertainty could soon ‘come to the fore’.
Tom Stewart-Moore, head of farms agency Scotland for Knight Frank, said there were similar trends throughout Scotland, but there was a lot of regional difference.
“The good, premium places are selling really well,” he said.
He added there was good demand for prime arable land, but less so for forestry.
David Hebsdich, partner at Carter Jonas, said the outlook was more nuanced than ‘two-tier’ implied, with buyers looking at factors including accessibility, fertile ground or sporting uses.
“In a post-Brexit world, the new schemes available will be added to this list as another key consideration,” said Mr Hebsdich.
He added the ability to take payments in a lump sum could generate an opportunity to manage retirements and release land.
“However, whether this amount will be significant enough to impact the market is debatable,” he said.
Source: FG Insight