Land prices soar by almost 20% in Munster – but decline elsewhere
Land prices in Munster increased across all categories in 2017 and are now back at the high levels experienced in 2013, according to a new report on agricultural land prices.
The Society of Chartered Surveyors Ireland (SCSI) / Teagasc Agri Land Market Review and Outlook 2018 found that prices in the province increased on average by 11%; but declined elsewhere – with the biggest falls occurring in Connacht/Ulster.
The increases in Munster bring average per acre value to €9,900, slightly ahead of Leinster (excluding Dublin) on €9,800, with both almost twice ahead of the €5,500/ac reported in Connacht/Ulster.
Selling prices in Munster for medium-sized holdings – between 50 and 100ac with a residence – increased by 17%; while those without a dwelling rose by 13.5%.
For holdings over 100ac the increases were 10.5% with a residence; and 14.5% without a dwelling. For small holdings – up to 50ac – the increases were 10% and 2%, respectively.
Miah McGrath, chair of the SCSI’s Rural Agency Group, said the rebound in land values across Munster was strongly linked to the rise in milk prices.
“Dairy farmers are clearly in expansion mode and that is what is driving prices across the province. Milk prices have been on the rise for a sustained period and are now holding in the mid 30c/L range.
That is giving confidence to farmers and, even if prices look set to come back 10% this year, the impetus remains to expand production.
“The other factor affecting values is more historic and relates to the slow turnover of land. For that reason, when a good farm comes on the market, there’s always a lot of interest,” he said.
Trevor Donnellan, head of the Teagasc Agricultural Economics and Farm Surveys Department said dairy farm income grew strongly during 2017 as a result of higher milk prices.
“The higher prices more than compensated for the additional costs of production. In regions such as Munster with a greater concentration of dairy farming this will have been reflected in increased demand for land by dairy farmers.”
By contrast the situation in Leinster was not as positive with values dropping in all categories by an average of 4%.
Prices for medium-sized holdings – 50-100ac – recorded the biggest falls.
Holdings with a residence fell by 4.5%; while those without a dwelling fell by 8%. For holdings over 100ac the figures were 3% with a residence and 6% without; while for holdings up to 50ac the falls were 4% and 3%, respectively.
The most negative land market developments in 2017 were reported in Connacht/Ulster where values decreased across all land categories – in some cases by almost 20%.
The decreases effectively erode the increase in values in 2016.
For medium-sized holdings the falls were 13.5% with a residence and 15.5% without. Smaller holdings recorded the smallest declines – 5% with a residence and 2.5% without.
McGrath says the declines in Leinster and Connacht/Ulster may be due to more localised issues.
“In Connacht/Ulster the holdings are traditionally of a smaller size and the fact that these holdings recorded the smallest declines suggests that local farmers are looking to bring their farms up to the 100ac plus mark.
It’s unusual to see land values in Munster surpass those in Leinster, albeit by a very small margin. This underlines the strength of the Munster market; but also possibly reflects that we are now seeing more realistic pricing in Leinster.
“Some surveyors in the province are seeing strong demand for both smaller holdings – from locals – and for large holdings – from outside interests – but finding softer demand for medium-sized holdings,” he said.
Nationally 45% of SCSI members surveyed anticipate an increase of some sort for agricultural land values in 2018; with around half of those (22%) expecting any increase to remain below 5%.
This represents a more positive outlook for agricultural land values than 2016 when only 33% of SCSI members expected an increase. 42% of members anticipate no change; while only 13% predict a decline in values.
Regionally, SCSI members in Connacht/Ulster are the most optimistic with 44% predicting an increase in average values for agricultural farmland.
Donnellan said that milk prices in 2018 are forecast to be lower than in 2017. He said this will likely be reflected in a decline in the level of farm profitability in 2018.
“The extreme shortage of fodder during the spring of 2018 will have led to higher feed bills on many Irish farms.
Despite ongoing growth in the volume of milk production in Ireland, incomes earned in 2018, because of lower milk prices and higher feed and other costs, are likely to be down on levels observed in 2017.
While there was an increase in rents in Leinster, rents in Munster and Connacht/Ulster – with a few exceptions, notably tillage – tended to show stability.
One possibility is that the driver of the increase may actually be due to demand from dairy farmers, which may be pushing up tillage land rental rates in areas where dairy farming is prevalent.
The forecast by 52% of SCSI members that rental values will increase is greatly more optimistic than 2017 when only 35% of respondents forecast an increase in rental values.