The growth in the value of general farmland in 2023 was lower than the growth rate in 2022 according to the Agricultural Land Barometer from Sherry Fitzgerald.
The property agent has said that 2023 was a year of two very different halves for the agricultural land market, with values rising by 7.2% in the opening six-month period, the highest growth rate recorded for any half-year period since the series began in 2011.
In contrast, the second half of the year saw more moderate growth of 2.6%, reflecting the impact of reduced output prices and poor weather conditions coupled with higher lending costs.
This is in contrast to 2022, which saw steady growth across the entire year.
As a result, for 2023 as a whole, agricultural land values nationally, excluding Dublin, increased by 10%. This is compared to growth of 11.5% recorded for the previous year.
The weighted average price of an acre of farmland at the end of 2023 stood at approximately €11,929, up from €10,843 at the end of 2022.
Growth was seen across all regions during the year, with the midlands being the standout performer following a rise in values of 19%.
Following this were the west (+13.9%) and border (+12.3%) regions. The south-east region experienced the lowest level of growth over the year, at 5.5%.
These levels of growth come on the back of some high-profile sales within the agricultural land market, such as the 458ac Rostalla Farm in Kilbeggan, Co. Westmeath, which sold for €4.5 million in Q2.
An increasing number of purchasers during the year were from an investment background rather than farming, as agricultural land was considered a safe alternative investment opportunity, according to Sherry Fitzgerald.
As of the end of Q4, the most valuable agricultural land in the country was in the mid-east, with a price of €13,714/ac.
Notable growth was seen in Kildare and Meath according to the Sherry Fitzgerald barometer. The west region maintained its position as the region with the most inexpensive agricultural land despite growth of 13.9%, with an acre costing €8,200.
Outlook for farmland
There are a number of factors that are likely to impact the agricultural land market in 2024, according to Sherry Fitxgerald.
The turn of the year saw the culmination of anger within the farming sector, as farmers took to the streets en masse across Europe due to regulations and rising costs.
The effects of such regulations were evident in the Irish agricultural land market during 2023 as farmers sought to purchase more land to maintain their incomes or face reducing cattle numbers to meet nitrates regulations.
According to Sherry Fitzgerald, this is likely to continue in 2024 as farmers endeavour to meet requirements.
There is also uncertainty over whether the nitrates derogation will be reduced further or removed in the future, which may lead to further land acquisitions among dairy farmers to meet new regulatory conditions.
This also contributed to the strong performance of marginal land prices during the year, with nitrates regulations based on total landholdings, regardless of land type, according to the Agricultural Land Price Barometer.
The new enhanced income support scheme for young farmers (CIS-YF) designed to help them succeed in farming has also boosted demand for more affordable land, according to the research.
This is expected to continue in the year ahead. A portion of the demand seen in 2023 was from investors seeking to hedge against inflation.
However, activity among investors seeking to lease farmland may be deterred in 2024 following new rules introduced in Budget 2024.
These stipulate that any landowners purchasing farmland on or after January 1, 2024 must own the land for at least seven years before qualifying for relief on rental income.
On a positive note, costs facing farmers are expected to be lower compared to 2023 levels, while output prices are expected to rise, with Teagasc predicting strong growth in average farm incomes compared to 2023.
It is likely that elevated interest rates contributed to the slower pace of growth in land values during the second half of 2023 as more difficult lending conditions impacted the price that farmers were able to pay for land.
However, it is now widely anticipated that interest rates will decrease in the year ahead, with the first reduction expected mid-year, according to the barometer.
In 2024, demand is expected to remain strong while growth in land values is expected to remain at more normalised levels, Sherry Fitzgerald has said.