Farm Ireland
Independent.ie

Monday 24 April 2017

Munster land values drop by 20pc due to milk price slump

Large southern holdings hardest hit by 2016 milk sector income crisis, says new report

Jim O'Brien

Jim O'Brien

The land market in Leinster and in Connacht/Ulster faired better than Munster
The land market in Leinster and in Connacht/Ulster faired better than Munster

A sharp drop in Munster land prices has been blamed on the severe income difficulties in the dairy sector through 2016.

The 20pc fall in the average sale price of larger holdings in Munster is one of the stand-out findings of a comprehensive land market review which was undertaken jointly by the Society of Chartered Surveyors of Ireland (SCSI) and Teagasc.

The report found that selling prices in Munster for holdings of over 100ac with a residence fell by 20pc to €9,154/ac in 2016, while those without a dwelling fell by 9pc to €8,577/ac.

The fall in residential land prices in Munster equates to €2,242/ac and reflects the collapse in dairy incomes from 2015 to 2016, when base milk prices dropped from 38c/l to 26c/l.

Medium sized and small holdings in the southern province were also significantly cheaper last year. The average sales price for residential farms of between 50ac and 100ac fell 10pc to €9,092/ac, while non-residential holdings were back 11pc to €8,800/ac.

For small holdings, up to 50ac, falls of 4pc for residential properties and 3pc for non-residential units were recorded. The averages were €10,622/ac and €9,636/ac respectively.

The land market in Leinster and in Connacht/Ulster faired better than Munster, with prices generally improved.

In Leinster, farms of less than 50ac showed the largest increase, with average prices increasing by 6pc relative to 2015 for non-residential holdings. These averaged €11,204/ac, while residential holdings in the same size bracket made €12,666/ac.


However, larger farms were more difficult to sell.

Residential holdings over 100ac were back 1pc on average to €10,043/ac, while non-residential properties sold for €9,518/ac.

Residential farms of between 50ac and 100ac were 3pc cheaper than 2015 at €10,988/ac, while non-residential holdings averaged €10,391/ac.

The biggest lift in prices was recorded in Connacht/Ulster where values increased across all land categories. However, the region remains the cheapest in the country in which to buy land.

The largest price rise reported west of the Shannon was for residential farms of less than 50ac, which increased by an average of 12pc to €6,556/ac. Non-residential farms in this category were 3pc dearer at €6,375/ac.

Non-residential farms of over 100ac averaged €5,529/ac, an increase of 5pc, while residential holdings were 2pc dearer at €5,457/ac. Properties in the 50ac to 100ac size bracket in the north and west sold for €5,779/ac for those with a residence and €5,838/ac for those without.

Teagasc economist Jason Loughrey said that depressed profitability from, beef, tillage - in particular dairy farming - was having a negative effect on land values.

"The fall in land values in Munster may represent a reaction to the drop in profitability on dairy farms in 2016 following two particularly high dairy income years in 2014 and 2015," Loughrey said.

"While cattle prices declined by between 5pc and 8pc, and cereal prices fell 5pc, milk prices declined by 9pc," he pointed out.

"The fall in dairy prices in particular may explain why land rental rates and sales prices differed between Munster and the other regions.

Depressed dairy farm incomes appear to have led to reduced demand for agricultural land with the magnitude of the price decline increasing in accordance with the size of the land area transacted," said Mr Loughrey.

"While cattle prices declined by between 5pc and 8pc, and cereal prices fell 5pc, milk prices declined by 9pc," he pointed out.

"The fall in dairy prices in particular may explain why land rental rates and sales prices differed between Munster and the other regions. Depressed dairy farm incomes appear to have led to reduced demand for agricultural land with the magnitude of the price decline increasing in accordance with the size of the land area transacted," Mr Loughrey added.

The survey also recorded a continuing shift from con-acre to long-term leases as landowners take advantage of the tax breaks available for lettings agreements of five years and longer.

Despite the difficulties experienced in 2016, Edward McAuley of SCSI said his members remained cautiously optimistic for 2017. He pointed out that 42pc of those surveyed predicted that agricultural land values would remain unchanged in 2017, with 23pc predicting a modest increase.

"While Irish dairy farm incomes are expected to rebound in 2017, livestock prices are expected to decline, while cereal prices will remain unchanged," McAuley maintained.

"While the impact of Brexit may feature prominently as a concern for those contemplating activity in the land market, CAP reform and climate change policy also represent important considerations.

"Economic pressures within the farm sector will continue to point towards consolidation of smaller farms into larger units," he added.


For Stories Like This and More
Download the FarmIreland App


Indo Farming