Uncertain times produce mixed outlook for land market

Average farmland values are predicted to be static or to rise slowly this year and next, despite strong demand.

However, agents’ views are very mixed on likely supply, with some predicting a significant drop and others expecting a rise.

Savills forecasts values to hold for the next five years with marginal growth towards the latter end of the period.

See also: Farm and land sales – common issues that delay and complicate

Development activity and competition from interests outside farming will drive the limited rise.

Uncertainties such as the inheritance tax (IHT) reform usually result in a period of reduced market activity, leading many owners to take stock rather than make big decisions.

This, alongside variable harvests, extreme weather and financial challenges, leads the firm to expect 20% less land to be offered for sale in Great Britain than in 2024.

This would put 150,000 acres on the market, followed by an increase in supply of land for sale from 2027 to fund IHT liabilities.

As development activity increases, driven by the government’s push for housing, there will be more rollover buyers in the market, helping to maintain values, says Savills.

Advisers expect most ownership changes for IHT reasons this year will be through transfers within families as they move to mitigate the potential tax liability.

In the meantime, private buyers may review their investments and sell if they have an alternative investment idea that outperforms farmland and its remaining 50% IHT relief, Savills says.

While the cut in IHT relief from April 2026 may affect some decisions to invest in or remain invested in farmland, ownership still attracts favourable IHT treatment compared with other assets.

Interest rates have remained higher for longer than expected, challenging some businesses.

Savills’ national head of rural agency, Alex Lawson says: “We don’t see the banks forcing sales but there are some uncomfortable conversations being held.”

At Carter Jonas, head of rural agency Andrew Chandler expects more land to be offered for sale this year, and is involved in more potential sale discussions now than four or five months ago.

Stable bookings

Bookings are fairly stable so far, Andrew says, with good early interest in disposals.

He expects the volume of bare land sales in England to continue at relatively high levels in 2025, as they have for the past two years, and is looking at blocks of varying sizes.

IHT planning is a lesser factor in these decisions than others, such as business restructuring to spread risk.

He says: “I am seeing an element of capital release [through land sales] to improve returns by investing in, say, commercial let developments or consolidation of portfolios, shipping out poorer ground.”

Values are also becoming more polarised, so that the value spread might be between £9,000 and £12,000/acre.

This is dictated by location, accessibility, acreage and degree of neighbour interest, says Andrew.

Scotland

Bell Ingram has 10 offices across Scotland and the north of England.

Senior partner Malcolm Taylor expects more land to come onto the market in Scotland this year, and probably more than in the past five years.

“We have nothing concrete yet, but have been on more farms than normal to quote for sales,” says Malcolm.

Land price is a common driver for selling, with people wanting to take advantage of current good levels.

“Lack of succession is also a factor and uncertainty as to what the Scottish subsidy regime will be after 2026,” he says.

“Fully equipped farm sales were common last year, particularly if the house was not suitable to lot separately, for example due to size and location within the farm.”

“Many farmers buying a second farm do not want additional cottages due to the letting legislation in Scotland giving greater security to tenants.

“There seem to still be purchasers for environmental reasons, but the main reason for buying is to secure land for growing potatoes.”

Demand outstrips supply

Despite numerous challenges in the political and environmental landscape, demand is still stronger than supply, says Knight Frank.

“There are still plenty of active buyers in the market looking for a wide variety of rural property, with varying motivations,” says Alice Keith in the firm’s farms and estates team.

For example, Knight Frank sold the 9,486-acre Rothbury Estate in Northumberland to the Royal Society of Wildlife Trusts in 2024.

This has grassland, moorland, woodland, farms and cottages.

At Strutt & Parker, head of estates and farm agency Sam Holt says the firm has a healthy pipeline of new launches lined up for this spring but is not expecting supply to rise significantly.

He points out that many non-farmer buyers of land, such as corporate businesses, charities and pension funds, are not subject to IHT.

“There are also likely to be high-net-worth individuals who will not be deterred by the prospect of a 20% IHT charge on land assets because, compared to other investments, it is still a favourable rate and there are measures they can use to transfer the land before inheritance tax might be triggered,” he says.

“There are some incredibly popular areas of the country where the land market has been very strong and is likely to continue to be so.

“It is arguably more of a buyer’s market than it was a couple of years ago, but scarcity still underpins the market with limited opportunities to acquire land in specific postcodes.

Diverse income potential a factor

“Farms with the potential to generate diverse income streams, with strong environmental potential or simply in the right place at the right time, are likely to continue to be popular – among both farmers and investors,” says Sam. 

“There are some less-populated parts of the country – those dominated by farmer-buyers who are dependent on the income that can be derived from the land – where land values are already lower and farms do take longer to sell.

“In these parts of the world, the IHT changes may have more of an impact resulting in a softening of prices, but we are still not anticipating significant changes.”