We’ve all heard the oft-quoted phrase: ‘Buy land, they’re not making it anymore.’ Having read Jim O’Brien’s six-month review of the agricultural land market, it’s a phrase that seems truer than ever.
The market appears to be red hot at the moment, with dairy farmers and non-farmers driving prices to new highs, particularly in the east of the country.
But where will it end or are farmland prices destined to go higher and higher? The country’s auctioneers are bullish and see no signs of a downturn in prices anytime soon — €15,000/ac is the new €10,000/ac it seems!
And there are a number of trends that certainly underpin this view. Firstly, as we reported on the front page of the Farming Independent, new nitrates rules are forcing many dairy farmers to reassess their business and ask themselves have they enough land to support their cow numbers?
Farm orgs are saying many will discover they don’t and as one agri-consultant told me this week, “the last thing dairy farmers will do is reduce cow numbers”.
This has and will continue to see strong demand for land in dairy areas. Regular readers of our property section will have seen the term ‘local businessman buyer’ appear more frequently of late.
Land has always been seen by this cohort as a good long-term investment, and attractive tax breaks for long-term leasing and inheritance are no doubt in the minds of these buyers.
Over the coming decade, environmental buyers could add another dimension to the land market, particularly in marginal areas. The UK is already seeing the phenomenon of large multi-national corporations buying land to offset emissions, while here, Coillte has committed to increasing the forest estate by 100,000ha.
The ‘agricultural value’ of land may not be the only determinant of its value. As a counterbalance to these bullish trends, there are those who believe the demographics of Irish farmers will see more land on the market over the next 10 years.
But very little land was sold for less than €10,000/ac in the first half of this year. At this price, any large holding is completely unaffordable to non-dairy farmers unless other off-farm income can be used to supplement what can be made on the farm.
It begs the question: are these kinds of prices economically justifiable in the long run and will fewer and fewer genuine farmers be able to compete in this market as the years roll by?