Increase in long term leases holds land prices steady

Ciaran Moran

Ciaran Moran

In the opening half of the year agricultural land values have risen by 1.8pc, according to Sherry FitzGerald Research.

This saw the average price of farmland in Ireland, excluding Dublin, increased to just over €9,700 per acre.  

Following growth of 0.9pc in the second quarter of the year, cumulative price growth for the first half of 2018 reached 1.8%. In comparison, the opening six months of 2017 saw land values rise by a more subdued 0.3pc.

Growth in agricultural land values has been robust for the past year now, with prices increasing 3.1pc annually to Q2 2018. This contrasts with a decline of 1.5% in land values in the twelve months to June 2017.

Roseanne De Vere Hunt, Head of Sherry FitzGerald Country Homes, Farms and Estates, said the continued increase in land prices nationally is a positive reflection of the demand in the market at present.

"However, demand may be tested given the extreme weather conditions this year which have affected farm incomes. This along with the possibility that a no-deal Brexit may occur, has brought about a greater cautiousness to the agri-land market”.

All agricultural land types saw their value rise, with both prime and marginal grassland observing growth of 1.7pc in the first six months of the year.

Furthermore, on annual basis prime and marginal grassland has increased by 3pc and 3.2pc respectively. On the back of these price gains, the average price of prime grassland nationally, excluding Dublin, was approximately €10,950 per acre, while poorer quality grassland was approximately €6,550. Similarly, prime arable farmland increased by 1.8pc in the opening half of 2018.

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Prices have been the strongest in the Mid-East. Niall Mulligan, Sherry FitzGerald Royal, said the price of good quality agricultural land in the Meath area have remained very healthy between €10,500/€11,500 per acre. 

"Steady commodity prices have helped the market but more importantly the reduced volume of good farmland coming for sale owing in no small part to the increase in long term leases has helped keep prices static”.  

The value of land has been rising against a backdrop of a strengthening national economy and the dairy sector outperforming expectations for the year. The Ornua Purchase Price Index shows that the market returns on dairy products purchased by Ornua remain broadly on par with last year. Milk production has remained largely stable, and although prices have declined from last year, the steep drop off that many expected at the start of the year has fortunately been avoided.

However, these increases in land values may possibly be at risk. Brexit looms large over the Irish agriculture industry. A no-deal scenario would have severe repercussions for farming, greatly diminishing exports to one of our largest trading partner. This would subsequently negatively impact on agricultural land values. Furthermore, the cost burden for farmers is also mounting. Increasing costs, exacerbated by the fodder crisis, are eating into farmers margins which in turn is hampering market activity.

Online Editors