Land prices fell across all categories in Munster in 2016

Land prices fell across all categories in Munster in 2016 compared to the previous year, according to a new report on agricultural land prices.

The Society of Chartered Surveyors Ireland (SCSI) / Teagasc ‘Agricultural Land Market Review and Outlook 2017’ found that prices remained relatively stable elsewhere, with Leinster recording modest increases.

In 2016, selling prices in Munster for larger holdings – over 100ac with a residence – fell by 20%, while those without a dwelling fell by 9%, the report found.

For medium-sized holdings – between 50ac and 100ac – the falls were 10% with a residence and 11% without. For small holdings, up to 50ac, the falls were 4% and 3% respectively.

Depressed profitability from beef, tillage and, in particular, dairy farming were having a negative effect on land values, Teagasc Economist, Jason Loughrey, said.

The fall in land values in Munster may represent a reaction to the drop in profitability on dairy farms in 2016; following two particularly high dairy income years in 2014 and 2015.

“While cattle prices declined by between 5% and 8% and cereal prices fell 5%, milk prices declined by 9%.

“The fall in dairy prices in particular may explain why land rental rates and sales prices differed between Munster and the other regions.

“Depressed dairy farm incomes appear to have led to reduced demand for agricultural land with the magnitude of the price decline increasing in accordance with the size of the land area transacted,” Loughrey said.

Leinster

The land sales market in Leinster fared better than in Munster in 2016, the report shows. Prices for smaller lots of less than 50ac showed the largest increase, with average prices increasing by up to 6% relative to 2015.

A review of the market for the medium (50–100ac) and larger lot (over 100ac) categories in Leinster indicated more modest improvements. Increases of 1% and 2% respectively, for transactions that did not include a residence, were reported.

The leasing market has noticeably decreased as landowners take advantage of tax relief for long-term leasing, according to the report. One rural surveyor quoted in the report said that farmers prefer long-term leases rather than the traditional conacre system, as it gives them more flexibility and tenure for a fixed period.

Connacht / Ulster

It was found that the most positive land market developments in 2016 were reported in Connacht and Ulster, where values increased across all land categories tracked in the survey.

The largest increase reported in Connacht / Ulster was for transactions of less than 50ac including a residence, where prices increased by 12%. For the other land categories in these regions, value increases ranged from 1% to 5%.

land prices

While the performance of the market in Connacht / Ulster contrasted with Leinster and Munster, it should be noted that average land prices in Connacht / Ulster remain below the average in the other two regions, SCSI Regional Manager, Edward McAuley, said.

“Some surveyors attributed the price increases in Connacht / Ulster to the expansion of commercial forestry and believe this expansion is taking a substantial volume of some of the better agricultural land out of circulation.

“With generous tax-free premiums available to landowners and investors, investment returns are likely to be substantially higher compared to livestock farming,” he said.

Prospects for 2017

Some 42% of rural agency surveyors predict that agricultural land values will remain unchanged in 2017, with 23% predicting a modest increase of between 1% and 4%, McAuley said.

He also noted that 40% of surveyors located in Leinster and Munster expect land values to increase in 2017; compared with a more negative outlook in the Connacht / Ulster region, with only 14% signalling an increase in values.

“While Irish dairy farm incomes are expected to rebound in 2017, livestock prices are expected to decline while cereal prices will remain unchanged.

Beyond commodity prices, there are a range of other issues which will shape the future of the agricultural land market in Ireland.

“While the impact of Brexit may feature prominently as a concern for those contemplating activity in the land market, CAP reform and climate change policy also represent important considerations.

“Economic pressures within the farm sector will continue to point towards consolidation of smaller farms into larger units,” he said.

Land rental

The performance of the land rental market across the regions in 2016 was more uniform than the land sales market, the report found.

Increases of between 1% and 9% were recorded in Leinster for the renting of land suitable for grazing and silage. Meanwhile, rental prices for this type of land were steady (on average) in Munster and Connacht / Ulster last year, the report added.

Rental rates for cereal land increased in Leinster and Munster in 2016, but fell in Connacht / Ulster when compared with 2015 levels.

The report also outlined that 34% of chartered surveyors expect the price of rented land to increase in the coming year, while 51% forecast no change.

CLASSIFIED ADVERTS