Agricultural land on the up

AGRICULTURE has hit an upturn after a period of transition in which the implications of decoupling were absorbed.

The kickback is that land is back in favour as an investment, but the train is only pulling out of the station — there has been no reckless buying to date, and if the residential market has taught us anything, there won’t be.

Confidence is everything in market terms: stock markets bloom or wilt on fear and hope, and since the middle of 2007, increased cash flow has led to bolder investments from farmers.

However, most property pundits agree that price levels won’t go mad, as they did in 2004/2005 — there are too many factors in the overall property market to mitigate against this.

First, developers are effectively out of the picture after the property market crash, while the second strong driver of the market, infrastructural development, looks set to slow down, despite Government promises to the contrary.

Third, the hobby farmer, who had driven up the price of smaller land sales, is now stymied by falling property prices on the basis that you can’t buy land if you can’t sell your house first.

These three factors, which had driven up the price of agricultural land, are now, to all intents and purposes, out of the way, and farmers are having a freer run.

Dairy and tillage are forging ahead and the banks are more than willing to fund expansion. Restrictions on Brazilian beef have moved a big cloud from over the heads of drystock farmers.

Government grants and the cheque in the post add an extra bit of servicing power to capital expenditure.

Economies of farming scale can improve the return on the investment.

But drystock farmers should think long and hard before rushing out to borrow for farm development on the strength of their properties, says Eddie McQuinn of McQuinn Consulting in Tralee. In most cases, where farms are worked part-time, the return won’t cover the investment, he says, even with a 60% grant. The part-time employment of husband and wife will only serve to support what will, in effect, be an expensive hobby farm.

For the other sectors, it’s a different story: rising milk and grain prices have already had a positive effect on land sales.

The country’s largest and highest level sale was the 1,220-acre Bergerin Estate in Co Wexford, believed to have sold by tender just before the year’s end.

Sold by the Lee Strand dairy co-op of Tralee, it has some of the best land in the country, in a coastal position in south Wexford.

Coincidentally, Lee Strand CEO William Kennedy was the buyer of the largest Munster farm deal this year.

He paid €5.5 million at auction in early February for a 206-acre farm at Croagh, Adare, adding to his substantial portfolio of agricultural holdings.

Basil Ruttle of GVM handled the sale and said the farm was one of the biggest and best to come up in the Golden Vale this year.

The vendor was Liam Fitzgibbon, a farmer who is also well known in car rally circles.

The same amount was paid for a much smaller holding in Waterfall, Co Cork.

Auctioneer John Hodnett achieved €5.5m at auction for a 35-acre commercial/residential/ farming property at Ballinvoultig, Waterfall, where the purchasers were some of the beneficiaries of the executor sale.

Another large “pure agricultural” sale was completed last month when the renowned farm of George and Betty Buckley at Rockvale, Castletownroche, sold for close on €4 million through auctioneer Christy Buckley.

The 115-acre holding on the banks of the Awbeg River made the bones of €35,000 per acre — very impressive for a farm of its size.

One of the most unusual farm sales of the year, a 160-acre dairy farm at Currabwee, Dunmanway, came to market with seven wind turbines, which were excluded from the sale.

The ‘doughnuts’ of land surrounding the turbines and the right of way accruing to them didn’t turn buyers off, and the property was sold during the Christmas week for a reputed €2.8m through auctioneer and agricultural consultant Mike Brady of the Brady Group.

All in all, land made between €20,000 and €25,000 per acre for good quality and the attachment of quota to land didn’t have a strong bearing on price.

Secondary quality land lots made from €14,000 upwards, but the real strong performer was marginal land, which went from an average of €2,000 per acre to €3,000 per acre.

Demand outstripped supply, and land suitable for afforestation was hard to come by, according to most of the agents interviewed. This demand has been fuelled by the alternative energy sector. Wind farms and forestry look set to be a popular area for outside investors in the coming year.

A less positive, but growing sector of the market has been the sale of land due to separation and divorce proceedings.

Otherwise, after 10 years in the doldrums, the agricultural sector looks set to be one of the better economic performers in 2008.

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