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Irish farming land is tops in global price ranking

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Economist Jim Power

Economist Jim Power

Economist Jim Power

Ireland is the dearest place in the world to buy farming land according to a recent survey by the Financial Times in London.

The global land price survey, shows that the average price of farming land in Ireland is €9364/ac.

It is noteworthy that the next most expensive country in the world to buy land is New Zealand (€8532/ac) where the agriculture sector is dominated by dairying.

The next dearest European location to purchase land is Denmark at €7,934/ac followed by Britain at €5,448/ac.

Poland, France, Canada, Brazil, Romania, Hungary, the United States and Canada, all recorded a price per acre below €4,000 in the Financial Times survey while land in Australia is currently changing hands for as low as €482/ac.

The Financial Times figure for Irish land prices is broadly in line with the quarterly Irish Land Market Review published this week by Sherry Fitzgerald auctioneers.

It found that the average price per acre paid for farming land in Ireland in the last quarter increased by 2.7% to €9,550.

Economists and auctioneers believe the value placed by landowners and farmers on their land is essentially historic. However, they also agreed that this has been inflated over the past couple of years by demand for land ahead of the EU's abolition of milk quotas next year.

Economist Jim Power told the Farming Independent that the main reason for high farm land prices in Ireland is down to the low turnover of land in the country.

"There is a very limited supply of land in Ireland and an incredibly low turnover of land, which in turn creates a demand that in turn affects the price of land," he said.

"There is also a 'caste system' operating within Irish agriculture with the dairy farmers at the top, tillage farmers- depending on the weather-in the middle, with beef and sheep farmers at the bottom. It will always be the case.

"But the post milk quota situation in 2015 is creating a demand for land and dairy farmers at the moment will buy anything that moves," he said.

"What we are seeing now is an artificially strong demand for land with bank lending to agriculture centred almost entirely on the dairy sector – at the expense of the other farming sectors. This is because of the predicted long term prospects when milk quotas are abolished."

Power, however, believes this is a "short term approach to farm investment'' which will not be good for the long term viability of Irish agriculture.

"What happens when dairy margins tighten and these borrowings have to be paid off?"

Kildare-based auctioneer Paddy Jordan says he would not disagree with the findings of the Financial Times' survey.

Turnover

"The low turnover of land in Ireland is mainly the cause of high land prices'', he says.

"You must remember the recent statistic about land in Ireland. Apparently land in France is sold once in every 70 years while land in Ireland is sold only once in 400 to 500 years.

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"I recently sold 108 acres of good tillage land at €16,500 an acre. That is above the number you are quoting, but most of the recent transactions would be within an ass's roar of the figure,'' he says.

New buyers are a mixture of dairy farmers who "would buy outside the ditch anyway'' and farmers buying land as a long term investment.

"There are a lot of cash buyers who are interested in land because interest rates on deposit accounts are so low," says Jordan.

"Many of them are farmers who sold land near towns for huge sums during the boom. You must remember that not all of them used the boom time money to invest in AIB and Anglo Irish.

"They still have the money to invest and when you buy land you know the land is still going to be there tomorrow morning.

"They are getting two bites of the cherry – land which they can farm now and land which they can use as an investment for the next generation who will have no memory of the economic crash.

"I suppose it's all a question of supply and demand but you have to remember there is a lot of good land in Ireland compared to the USA where there is an awful lot of bad land,'' he added.

Border region sees the only decrease in land values

The average price of Irish farmland rose by 2.7pc from €9,300 to €9,550 per acre during the first quarter of the year, according to the Irish Land Market Review just published by auctioneers Sherry Fitzgerald.

The review is based on actual prices or prices likely to be achieved by Sherry Fitzgerald's network of 56 agents nationwide and covers sales of grassland, prime tillage land, marginal grassland and forestry land.

Land prices in Cork increased by 9pc contributing to a 7.1pc rise in land values in the south west, where prices increased from €9,550 to €10,650/ac during the quarter.

Land values in the midlands increased by 3.9pc and values in the mid east region rose by 3.1pc. Both the Dublin and south-east land markets remained stable during the quarter, but land values in the Border region dropped by 0.7pc. The average value of grassland increased by 3pc ( €10,500 to €10,750/ac) with the highest values recorded in the Dublin region (€13,500/ac). Dublin is followed by the south west where grassland values grew by 7pc to €11,700/ac, driven by strong demand and sales in Cork.

Grassland values in the mid east region increased by 6pc to €11,600/ac, but the Border region showed a marginal decrease of 1.5pc.

Looking at the overall national picture, grassland values vary from more than €15,000/ac in the right locations to as low as €5,000 in counties like Leitrim and Roscommon, where demand is weaker.

The average price per acre for tillage land increased by 3.2pc in the first quarter to €11,600.

Values in the south west region were up 7.1pc with Cork again the star in the salesroom. Tillage land prices increased there by 9.3pc.

The value of tillage land in the mid west region grew by 4.8pc during the first three months of the year with the midlands and mid east markets growing by 4pc and 4.2pc respectively.

The average value of prime tillage land in Dublin was €18,000 /ac.

Prices nationally for marginal grassland averaged €6, 750/ac – a rise of 1.5pc on the previous quarter.

The south west and midlands saw the largest increases (9.2pc) with Longford and Laois driving the increase in the Midlands.

Mature forestry of 25 years or more is selling at €3,700/ac – up 2.2pc with a notable uplift in prices (8.1pc) in the Border region.

While farmers remain the principle buyers in the markets, the authors note that cash investors and returning emigrants are also prominent. The report also warns that access to bank finance remains an issue for dairy farmers who are very active in the market.


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