Farm Ireland

Friday 28 October 2016

Buoyant land prices reflect resilience of farming sector

Declan O'Brien

Published 20/05/2015 | 02:30

Farmer's appetite for land appears to be holding
Farmer's appetite for land appears to be holding

A look at the property pages in this week's edition confirms not only the strength of the land market but also the resilience of the farming sector.

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The results show that farmers are once again paying over €10,000/ac for farmland and up to €15,000/ac in exceptional cases.

This is not a localised phenomenon. Over the last fortnight some fancy prices have been paid for land from Louth to Limerick and further south to Cork.

Despite last year's disastrous cereal and cattle prices, and the ongoing uncertainty in the dairy sector, farmers' appetite for land appears to be holding.

The strongest prices are obviously available in the better farming areas, with between €13,000/ac and €15,000/ac now being paid in some regions.

Asked what is driving the market, one auctioneer in the south had a very interesting perspective.

He said the uncertainty over the last three years regarding land eligibility and entitlements had resulted in the withdrawal of land that was usually rented. Farms that had been destined for sale were also held back.

He said the majority of these holdings were 'farmed' by the property owners for the last few years so that entitlements could be established.

The upshot was that "demand for land was strong but the supply weak", the Munster auctioneer explained.

But surely then, the recent hike in land values is a temporary phenomenon and prices will ease back once the uncertainties of recent years had been ironed out?

No, suggested my source, arguing that a new floor price had been established for land. That may be so, but did you ever hear an auctioneer talking down prices?

However, land price has to be related to the return which can be earned off of it.

Bearing this in mind, it will be interesting to see how the market settles once the transformative years of 2013-2015 are behind us.

It will also be fascinating to see whether the tax breaks on long-term leases announced in last year's Budget will encourage the release of much larger blocks of land onto the market.

The expansion opportunities that have arisen following the abolition of milk quotas has resulted in various leasing, partnership and working arrangements between farmers and land owners being developed.

Time will tell how these new arrangements work out but they have to be a welcome alternative to paying €15,000/ac or €13,000/ac or even €10,000/ac for land.

The Irish land market is obviously in transition at the moment and is benefitting from the continuing positivity around farming.

However, the land-owning structures within farming are also in transition.

Only time will tell how these developments interact.

Indo Farming