Farmland values dip further in the third quarter of 2016

Farmland values dipped further by 1% in the three months to September 2016, the latest Sherry Fitzgerald Land Market Review has found.

This drop in prices continues the trend of Irish agricultural land prices declining over the course of the year.

This drop in land values brings the year-to-date decline to 2.5%, which differs notably from the 1.6% price growth witnessed in the same period last year.

According to Sherry Fitzgerald, the average price of farmland nationwide stood at approximately €9,550/ac. This compares to €9,800 per acre recorded in the third quarter of 2015 – an annual decrease of 2.7%.

Regional variations persist; however all regions witnessed downward pressure in land prices over the past 12 months, with the exception of the midlands and Dublin, where the average price per acre remained stable year on year.

An analysis of the different types of land found that prime arable land prices remain the most challenged, with tillage farmers particularly struggling this year.

A similar situation exists in the prime grassland market, while the downward trend for marginal grassland, the poorer quality grassland, is more moderate, it found.

A survey carried out amongst over 50 agents nationwide on activity in the agricultural land marketplace reveals that over 80% of respondents believe supply levels, activity levels and buyer sentiment have either remained stable or decreased during the third quarter of 2016.

Meanwhile, uncertainty amongst farmers regarding income volatility, buying capacity and Brexit are among the main factors Sherry Fitzgerald found which perhaps are hindering farmers’ plans to purchase land.

Don Brennan, Sherry Fitzgerald Brennan Busteed, Bandon, Co. Cork said that in the south-west area, we are currently witnessing a correction in agricultural land prices, with local land parcels transacting for slightly less than what would have perhaps been achieved per acre 12-24 months ago.

“While farmers are still willing to pay a premium for neighbouring land, generally, buyers are more cautious and observing the marketplace.”

Prime Arable Land

An analysis of the type of land on the market reveals that prime arable land remains the most challenged, with average values declining by 1.5% in the quarter and by 3.2% annually, to stand at €11,350/ac, according to the review.

This compares with €11,700/ac recorded in the comparable quarter in 2015.

Sherry Fitzgerald found that the most notable price fall in prime arable land over the year was in the south-west region, dropping by 3.3% in the quarter and by 6.8% in the 12 month period.

This was again followed by the border region, with a quarterly and year on year fall of 1.5% and 4.0% respectively.

Notably, the average price per acre in the mid-east region fell below the €12,000 per acre bracket for the first time in almost three years.

In contrast, while prime arable land failed to see any price increase across Ireland in the third quarter, it found that the midlands enjoyed a marginal increase over the year and was the only region to do so, rising by 0.3% in the 12 month period.

Evidence on the ground suggests that tillage farmers throughout much of Ireland are particularly struggling this year, with a poorer production of crops and grains.

Sherry Fitzgerald has said that this has led to weaker demand for land reinvestment, coupled with farmers being forced to sell for a lower price per acre than they would have hoped to achieve.

Prime Grassland

Meanwhile, the average price per acre of prime grassland, the best quality grassland, fell nationally by 0.9% in the third quarter of the year, to stand at approximately €10,700/ac.

This represents a 2.5% fall in the year to date, while the average price per acre was 2.9% lower annually.

Notably, this annual decline largely contrasts with the 2.4% growth rate recorded in the comparable period last year.

Sherry Fitzgerald found that in the three months to September, the mid-east was the most challenged region, with the average price per acre of prime grassland falling by 2.2%. This was followed by the border region, at -2.1%.

Annually, figures show that the south-west and border regions were again the largest contributors to the downward movement, declining by 6.3% and 5.3% respectively. The south-east region also saw a year-on-year decline of 3.0%.

The average price per acre for prime grassland across Ireland ranged from approximately €7,800 to €12,000/ac at the end of quarter three 2016.

Marginal Grassland

The price trend for marginal grassland, the poorer quality grassland, is also moving downwards, albeit more moderately, according to Sherry Fitzgerald.

The average price per acre declined by 0.5% in the quarter and by 1.6% year-on-year, with values nationwide averaging €6,600/ac.

Given that this is a lower valued market, movement in marginal grassland values over the past year has had minimal impact on price per acre, with Sherry Fitzgerald finding very little deviation from the average price.

The mid-west region recorded the most notable downward pressure in the quarter, -2.5%.

Moreover, the average price of marginal grassland in the mid-west dipped below the €5,000/ac bracket during the quarter. All other regions remained stable in the three month period, with the exception of the mid-east, which saw a moderate 0.8% uplift in prices.

Year-on-year, the border and south-east regions were the main drivers of the declining prices, falling by 3.7% and 3.0% respectively. In contrast, the mid-east was the only region to see price inflation annually, 1.6%.