Land values are likely to hold their own this year despite the Covid-19 economic fallout, says auctioneer Clive Kavanagh
Are land values immune from impact of the Covid-19 emergency? It may seem like a silly question as the virus wreaks mayhem across the globe. However, land is a precious commodity and prices have traditionally held up in the face of volatility.
Clive Kavanagh (pictured) of Jordan Auctioneers believes that in the medium to longer term, values will remain firm.
He recalls that it is only weeks since people were reviewing the land market of 2019 and making projections for 2020, and while all those analyses and projections may now appear to be irrelevant Mr Kavanagh is not convinced that they are.
He claims that while the land market and the economy generally are taking a hit, the land market has a track record of remaining relatively stable, especially over the last decade.
"When you actually chart the value of land we can see that, while there are some peaks and troughs, the movement is nowhere as volatile as other investment mediums," he said.
Mr Kavanagh points out that even though agriculture has been through troubling times (he lists Brexit, the abolition of milk quotas and the evolving climate change pressures) the rate of variance in the price of land between 2010 to 2019 is just €1,266 per acre.
According to Mr Kavanagh, while the general economic climate has an undoubted impact on land prices and sales, his experience and that of Jordan Auctioneers shows that the impact of external factors is minimal in comparison to the impact on other segments of the property market.
"There are factors beyond value and return that hold the baseline value of land steady," he said, pointing to the fact that the amount of land sold on the market represents a tiny 0.5pc of the total land area.
"The opportunity for many farmers to buy land comes only once a lifetime, and therefore the question is not what the land is worth but what they can afford to pay," he said.
Like all auctioneers, Mr Kavanagh is aware of the emotional attachment Irish people have to land.
"In many situations it is seen as an heirloom, not an asset to be sold," he said, while purchase of land may be undertaken with no particular focus on return but rather a traditional family desire to complete the natural boundaries of a farm.
Looking at the price drivers in the farm property market Mr Kavanagh says that forestry land at €3,000 to €4,000/ac has in effect created a floor on land values while farm consolidation and farm expansion will always drive prices.
"Due to the fragmented nature of many holdings in Ireland, when good-quality land is offered for sale adjacent to a farmer who has ambitions to expand, they will generally try everything within their powers to buy it," he said. "This is particularity true for those in the dairy business where additional land adjacent to the main yard or milking platform has added value. In some instances, dairy farmers may dispose of an out-farm to facilitate the purchase of land closer to the milking operation."
The based auctioneer believes land will continue to be a safe place for money: "Land is a finite resource and unlike other investment products cannot be wiped out by external factors such as those we have suddenly experienced," he said.
"This will mean that it will continue to be perceived as a safe haven for money even if the return is minimal."
Looking to the immediate future he believes there is a steady supply of land waiting to be sold.
"We have a good supply of land coming to the market in 2020, as have many of our colleagues in the business.
"Some vendors will hold off selling due to lack of market confidence and that will further reduce supply [resulting] in good prices for those that are offered for sale. A key issue will be access to finance and the various lending institutions remaining active," he said
"In our opinion by the end of May, if business activity is up and running, plans can be made for a sale this year."