Farm Ireland
Independent.ie

Wednesday 19 September 2018

Analysis: Fine weather and pent-up demand driving land sales boom

 

Slyguff Lodge, a 65ac residential farm with a wide range of farm buildings near Bagenalstown in Co Carlow made €1.52m at auction last week, writes Jim O’Brien.
Slyguff Lodge, a 65ac residential farm with a wide range of farm buildings near Bagenalstown in Co Carlow made €1.52m at auction last week, writes Jim O’Brien.
A European brown bear enjoys a fruit-flavoured ice lolly at Camperdown Wildlife Centre in Dundee, Scotland during last week's heatwave. Photo: Bradly Yule/Camperdown Wildlife Centre/PA Wire
Mike Brady

Mike Brady

The sunny weather has coincided with a much-needed boost in the land market.

In recent weeks the property pages of newspapers and websites of land agents have filled up with adverts of land for sale and there have been a number of successful land sales at record prices in the post-recession era.

Agents are reporting increased enquiries from sellers and purchasers, so the question must be asked, is the boom back?

The main reason for the increased number of farms coming for sale at present is that many farm sales were deferred in the spring due to the wet weather and the depressed appetite of farmers for purchasing land.

A 91ac grassland farm at Clarkville, just outside Edenderry in Co Offaly sold at auction last week making €1.115m or €12,250/ac.
A 91ac grassland farm at Clarkville, just outside Edenderry in Co Offaly sold at auction last week making €1.115m or €12,250/ac.

The dream farm will always sell no matter what the location, climatic or economic conditions, but the average or below average quality farm needs to have all the positives running in its favour to get that sale over the line.

So why the increased interest and what are the factors in the sale and purchase of land at present?

A 101ac residential farm on the outskirts of Cork city sold for €5.8m or €58,000/ac at auction.
A 101ac residential farm on the outskirts of Cork city sold for €5.8m or €58,000/ac at auction.

There is absolutely no doubt that farmers moods are influenced by the weather.

In a year where we moved from winter straight into summer without a spring, the doom and gloom of the wet winter/spring were quickly replaced by summer optimism fuelled by burning rays of the sun. The first factor is certainly a feel-good factor caused by the good weather. The second factor is that dairy farmers had a cracking year in 2017, whereas the milk price has come back from the highs of autumn 2017, it has not fallen to the level predicted earlier in the spring by the milk processors.

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Adding land to the cow grazing block is a viable investment for many dairy farmers, and purchasing a second dairy unit is a developing opportunity for large, well-established, profitable farmers. Sometimes a dairy farmer may sell an outside farm to enable the purchase of more land in the grazing block. Dairy farmers are a big influence in the current demand for land.

The third factor is the strong domestic economy and the return of the speculator for land with development potential.

Hope, value and hedge funds were in evidence recently when two solicitors bought two parcels of land adjoining the industrial parklands of Naas in Co Kildare. A 58ac portion made over €15,000/ac while a 48.75ac portion made a staggering €1.175m or €24,000/ac.
Hope, value and hedge funds were in evidence recently when two solicitors bought two parcels of land adjoining the industrial parklands of Naas in Co Kildare. A 58ac portion made over €15,000/ac while a 48.75ac portion made a staggering €1.175m or €24,000/ac.

There have been recent strong sales recorded of such land in the outskirts of Dublin and Cork. The huge shortage of houses in this country has local authorities under pressure to zone land to kick-start building in residential areas with good services so that we can provide houses for our youth in the years ahead.

The farmers who sell development land or potential development land have money to buy land a little further out of town at prices above which make economic sense from a farm profitability point of view, and so the cycle begins.

The fourth factor is pension and investment funds investing in forestry and land suitable for planting. This has put a floor price of €5,000 per acre on marginal land throughout the country. It has also greatly boosted the price of plantations approximately 20 years old, where the forest premium has run out and they are still over a decade away from felling.

Having a strong base price for land suitable for forestry means it is onwards and upwards from there for land which is too good to plant.

The fifth, and an ongoing reason for increased land sales is marriage breakdown. Unfortunately, farmers are asset rich and cash poor so when a farm marriage breaks down, inevitably there will be a sale of land to raise cash and provide proper provision for both parties in the separation/divorce. Many land sales today are as a result of marriage breakdown.

The sixth reason for increased land sales is the sale of land by or caused by vulture funds.

These companies purchased distressed loan books from our banks at the height of the recession and are now cashing in their profits as the land has increased in value.

Many are sold by foreign or online agents as local agents will not sell the property if there is no goodwill from the farmer / landowner.

Finally, the inevitability of death and taxes are also reasons for land sales.

Executor sales, family settlements after badly written wills and land disputes will always be a source of land for sale in Ireland.

The crippling legal fees in such cases often force the sale of the land to pay everybody.

Wealthy people with large amounts of cash buy land to transfer the asset on to the next generation in a tax-efficient manner.

These taxation driven land purchases are common in estate type properties with large period houses. Both death and taxation will always be reason for selling and purchasing land in Ireland.

There are many factors affecting the ebb and flow of the land market. Clearly, the strong general economy and the strength of the dairy farmer are the two main factors at this time, but development land sales and the compulsory purchase of land for roads and utilities are coming fast down the tracks and will influence land sales in the next decade. The current sunny weather may only be the match which is lighting the fire.

Mike Brady is managing director at Brady Group agricultural consultants & land agents, email: mike@bradygroup.ie.

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