Average price of agricultural land increases in the third quarter of 2017

The average price of agricultural land in the third quarter of 2017 rose marginally, according to analysis carried out by Sherry FitzGerald Research.

Prices rose by 0.5% during that period, it added – with the average price of farmland nationally now standing at around €9,550/ac.

This slight increase in the third quarter of this year is reflective of recent national market trends, with average prices up 0.8% in the nine months to September 2017, according to Sherry FitzGerald.

The increase in the average value of agricultural land in Q3 has been attributed to recovering milk prices and rising production.

Dairy farmers’ additional revenue as a result of increased milk prices and butter prices reaching record highs in 2017 could lead them to increase production and thus increase their land holdings, Sherry FitzGerald explained.

Because of this, a moderate lift in land prices in the final quarter of this year and into 2018 could be possible, the estate agent added.

But it did warn that this price inflation may not materialise in full as farmers may be cautious about expanding production given the uncertainty that continues to surround Brexit, in addition to the long-term concerns regarding reform of the Common Agricultural Policy (CAP) in 2020.

This slight increase was welcomed after agricultural land prices suffered a drop of 3% in 2016 – which was put down to waning milk prices and profitability in the dairy industry.

Price volatility

Despite the improvement in the national average, the bounce back in prices has not been even across the country – with some degree of price volatility occurring within individual regions, according to Sherry FitzGerald.

At present, prime arable land seems to be leading the price growth in the agricultural land sector -although all three of the major agricultural land types recorded price growth in Q3, the estate agent added.

Research showed that prime arable land was up 0.8%, with prime grassland and marginal grassland up slightly at 0.5% and 0.1% respectively.

After these increases, the average price of prime arable land nationally stood at approximately €11,500/ac. The price of prime grassland and marginal grassland stood at approximately €10,700/ac and €6,500/ac respectively at quarter end.

When carrying out regional level analysis, market activity looks to be trending in a much less uniform manner, according to Sherry FitzGerald.

The south-west (2.0%) and the midlands (0.7%) recorded the largest price inflation, with the average price of farmland in these regions standing at €10,100/ac and €8,250/ac respectively by the end of Q3, figures show.

But a reduction of 0.8% during Q3 was recorded in the west in relation to general farmland, with prices dropping to about €6,650/ac.

However, this mixed bag of activity across the country for Q3 2017 is consistent with longer trends seen in agricultural land prices, the estate agent explained.

‘Brisk trade’

Commenting on the market in the midlands, Tony Mac Inerney – of Sherry FitzGerald Hyland, Portlaoise – said: “Agricultural land sales in the midlands were brisk for Q3, with prices in Laois ranging from €10,000/ac to €13,000/ac – depending on quality and location.

There is strong demand for highly coveted land at present, particularly around Portlaoise, which can fetch up to €16,500/ac at auction.

“Even poorer quality land is currently sought after and can reach up to €4,500/ac if it is suitable for planting.”

Meanwhile, Roseanne De Vere Hunt – head of Sherry FitzGerald Country Homes, Farms and Estates – explained that a slight increase in land prices in Q3 is positive, following the reduction witnessed last year.

“The improvement is mainly driven by the increase in milk prices and some optimism in the national economy. However, farmers remain cautious about expanding, due to potential effects of Brexit and the CAP reform in 2020,” she concluded.