Cashflow pressures could force south Wales farmland sales in 2016

Farmers in south Wales have shown great resilience to depressed farmgate prices but many could look to sell off blocks of land or their whole farm this year, according to agents in Farmers Weekly latest regional outlook.

They report that dairy and sheep farms have come under the most pressure, but say that all sectors have been affected by BPS payment reductions.  

The impact could be an increase in supply of farmland in 2016 – something that has been relatively thin over the past 12 months – with buyers holding rollover funds keen to buy up blocks or whole enterprises in the right location. 

Land market values – Wales

*provisional figures

** to 12 December

Source: Savills-SmithsGore

David Powell, Powells, Monmouth

• A lack of supply in 2015 in many locations was a continued trend. Given the dairy crisis, it is testament to farmers that more haven’t thrown the towel in. Land that came to the market last year usually received good, but not strong, interest.
• In 2016 we expect many clients to actively discuss accelerated retirement plans based on poor commodity prices and high costs. The shock of severely reduced BPS payments is also having an effect on sellers’ decisions to bring forward plans. More forced sales will come to the market this year, I fear.
• Farmer buyers have been very limited while investors with rollover money and amenity buyers showing interest in some land sales. Farmer buyers have tended to be restricted to cash purchasers, looking to reinvest where they have released capital or consolidated landholdings.
• I think most future sales will come from selling peripheral assets to release capital, or whole farm sale exit strategies. Demand from purely agricultural purchasers is predicted to be very limited in 2016.
• Good stock farms in excess of 150 acres with a modest residential dwelling and versatile buildings have been the easiest to sell. Sales with the opportunity to add value through development, such as barn conversions, have been notably less attractive to agricultural purchasers.

Malgwyn Evans, JJ Morris, Cardigan

• The land market was not truly tested during 2015 with relatively small blocks of land and no significant farms coming on to the market and with vendors conscious that now was not the right time to sell.
• Sales which have been achieved have been mostly to local neighbouring farmers with very little outside interest being shown.
• Confidence in each sector, especially dairying and lamb has been lost with everyone tightening their belts and prepared to weather the storm.
• We predict only a slight improvement in 2016 but the supply of land on to the market will still continue to be slow.
• Farming businesses are proceeding with caution. However, in the main, banks have been very supportive of the difficult trading.

Andrew Thomas, Herbert R Thomas, Cowbridge

• Over the past two years, farmers in Wales have seen the milk price collapse, the lamb price drop and BPS entitlements cut by about 20% and the fact is that commodity prices are having an effect on the land market, with people being more cautious with their investments.
• However, the main demand for land in 2015 came from neighbouring farmers. There was less demand from the equine market and lifestyle buyers almost disappeared last year.
• Parallels could be drawn from the way the market behaved in the 1990s when the economy was coming out of a recession. We saw a softening of prices that may happen again. Supply was thin but we expect that to be better this year.
• Housing developments are beginning to happen near Cardiff and there will certainly be money from landowners with rollover funds. That will definitely have a role to play in 2016.
• The best arable land in the region has been achieving between £10,500/acre and £11,500/acre, while pasture has been selling for about £8,800/acre. In 2016 we expect that the best land to stay around that mark.