A winter and spring that never seemed to end pushed out land sales from the traditional starting time of March or April to May and June. This was the result as some land was simply not presentable, according to Clive Kavanagh, director of Jordan Auctioneers and Chartered Surveyors, which is based in Newbridge, Co. Kildare.
In addition, the fodder crisis meant both buyers and sellers were more focused on day-to-day survival than making key long-term decisions.
“There were a number of extraordinary deals and prices achieved but underneath this ran a trend of slow sales, reluctant purchasers and uncertainty,” said Clive, who has been involved in the sale of agricultural land and country properties for the last 16 years.
The experience at Jordan in 2018 has shown a number of factors affecting price and interest levels.
“Quantum and quality of land being offered remain key factors in any sale. Large land holdings are more in demand than smaller parcels unless you have a number of adjoining farmers who are looking to expand and willing to bid against each other,” he said.
“Quality is always a key ingredient with land and considering the number of bad winters and summers experienced in recent times, selling poor or marginal land is proving difficult.”
Surrounding farmers make a difference to a sale, the Jordan director said. “You need active farmers looking to expand their enterprise in an area where land is being offered for sale unless the quantum is of such a scale that purchasers might entirely relocate.
We have noticed a considerable variation in values from the stronger farming areas to the weaker regions and this is even though the quality of offering is broadly comparable.
There is limited interest in land sales from business people, according to Clive. “The interest in land from the business community has not rekindled to the level pre-Celtic Tiger.”
Jordan’s believes this is largely a result of the change in the general type of business person now financially strong enough to purchase such an asset.
“Traditionally, many builders and developers had come from farming enterprises, albeit in some cases small holdings, but once their own business gathered momentum and they had spare funds, part of their desire was to buy a farm – go back to their roots as such.”
When the market collapsed in the mid-2000s many of these got into well publicised difficulty and their companies were taken over, wound up and merged into other entities, according to the Jordan spokesperson.
“The new generation of CEO have been brought up on a different ethos; the focus is on asset return and commercial viability. The purchase of farmland never stacks on this basis and the ‘love of the land’ does not carry the weight of old.”
Dairy sector
The expansion of the dairy sector has been well documented and Jordan’s has found that when good quality land is offered for sale adjacent to a farmer who has ambitions to expand, they will generally try to deal, whether this is at auction or on a private treaty basis.
“Some farmers have fragmented holdings which makes handling stock difficult so when parcels come for sale adjacent to the main yard/milking platform, they will generally try to negotiate. In some instances they have sold out farms to facilitate the purchase,” Clive said.
Finance-dependent
For the second year running, Jordan’s has experienced far more transactions being dependent on finance to complete. Prior to this there seemed to be money which perhaps had been hived away in the Celtic Tiger to buy land at a future date.
Up to 2016, 80% of our land sales were cash-based. In 2017 and 2018, we estimate this percentage to be less than 40%. Customers tell us that while bank lending has improved, this is largely to customers with very strong enterprises, low debt levels and with firm business plans.
Tillage and cattle farmers remain reluctant to buy land at present, partially due to volatility in input prices, returns and uncertainty for the future, said the Jordan director
“In stronger tillage areas such as south Kildare, the appetite still remains to expand and many of the farms have been built over generations whereby existing debt levels are low and this gives them the potential to raise the necessary capital if required.
“Nothing curtails business in general more than uncertainty and unfortunately Brexit brings all that. It is difficult to determine how the market will perform but clarity on the major issue will provide a clearer pathway for people to make some decisions.”
It is without doubt one of the biggest impacts to hang over the market for some time, according to Clive.
Predictions on future viability of farming enterprises will come to the fore now more than ever before with possible World Trade Organisation (WTO) tariffs likely to impact the agricultural sector more than any other.
Limited supply
Confidence within an industry is an important factor in land sales and prices but this is perhaps less so in Ireland than other European countries, said the director.
In Ireland there are many other emotive and additional factors that affect the price of land and serve to keep it at a relatively high base value. One of these is obviously the limited supply of agricultural land traded on a yearly basis; 0.5% of total land area.
An interesting statistic is that the average field in Ireland gets sold once every 400 years outside of a family compared to once every 70 years in France.
While it is the general opinion of Jordan’s that while prices may be volatile, there will still be trade.
“Farmers remain hugely ambitious, prepared to work whatever hours needed to make ventures viable but informed and sensible decision-making is still a key ingredient for success, now more than ever as we enter choppy waters,” he concluded.