Farm Ireland
Independent.ie

Sunday 24 September 2017

Viewpoint: Access rather than ownership is the new priority in the land market

Paddy Jordan recently handled the sale of a high class, 110ac non-residential stud farm close to Kildare town, which was brought to auction with a guide price of €1.32m or €12,000/ac.
Paddy Jordan recently handled the sale of a high class, 110ac non-residential stud farm close to Kildare town, which was brought to auction with a guide price of €1.32m or €12,000/ac.
Jim O'Brien

Jim O'Brien

The land market has been a story of two halves and two regions this year. Few sales broke the €10,000/ac mark prior to the autumn auction season and, while land sales are lively in parts of Leinster, they are in the doldrums in the west and in the dairy lands of Munster.

It is also interesting to note that major players in the equestrian sector are buying the bigger, headline farms.

There is a new land market emerging. Gone are the days when land sales, land purchases and land ownership were guided as much by emotion as by economics. Commercial reality is now the order of the day.

At one level, land undoubtedly continues to be a safe investment. Agricultural consultant Eddie McQuin says there are 40 years of CSO figures to show that, unlike any other asset or investment, land values have tracked inflation closely. Land is the best index-linked investment for one's money. "It is the safest hedge against inflation, there is none other to match it," says Mr McQuin.

But farmers expect land to be an active generator of money and not just a silent, if solid, investment.

It is no longer necessary to own land to get a return from it, indeed it can be a disadvantage. The important thing is to have access to it. Farm partnerships and long term leasing are becoming increasingly popular as a means of accessing land.

One commentator highlighted the key issues around this when he asked: "Why should a farmer pay out €200,000 for 20ac of land when he can lease it at €4,000 a year and write it off against tax?"

We are only beginning to see the impact these new models of land access will have on land prices.

Also Read


Newbridge auctioneer, Paddy Jordan, says the banks are currently capping the value of top class agricultural land at €10,000/ac. "No matter how good the ground is, after €10,000/ac you are on your own as far as the banks are concerned," he says.

In fact others say that after €6,000/ac you are on your own. In some cases, banks will only lend 30pc of the value leaving the buyer to find the rest in cash. Teagasc figures show that any sector of farming will struggle to justify borrowing this kind of money for an acre of ground.

Cash therefore is king in the farmland market. 'Tiger money' from the sale of development lands along with CPO money for road building has been washing around the auction houses. Many auctioneers acknowledge that unless you have a wad of such cash or a strong, non-farm family income, you are not at the races when it comes to buying ground.

In spite of volatile markets for dairy and other farm produce, land continues to be an economically sound investment. However, for most farmers land has to be an active, continuous and worthy earner. Access rather than ownership is the new mantra.

Indo Farming