Market swing sees some buy back farms they sold earlier
A good year, not a great year, but farm sales were buoyant in comparison to all other areas of the property market.
There were a few stand-out multi-million euro sales — enough to prove there’s money still around.
In our straitened and very chastened economy, Irish farmers became benefactors, instead of beneficiaries — buying land as it arose, and in some cases, buying back the same land they had sold earlier, now at a considerably reduced price, of course.
Single handedly, farmers are supporting the property market in rural areas, to the relief of auctioneering firms, accountants and consultants, as much of the rest of the economy goes south.
Prices have remained at an average of €10,000 per acre countrywide — a benchmark figure that hasn’t moved much in the last two years, in contrast to the accelerating deflation continues in other sectors of the property market.
It’s likely that farm prices will remain static in the near term at least.
There is no longer an appetite for property investment on the basis of appreciation.
Indeed, it can be said that land has finally reached a steady level, one where seller and buyer know where they stand, and where competition is neither reckless or insurmountable.
The other salient factor in this market is that land now fully reflects its economic value.
A farmer borrowing to purchase land can now afford to pay back a loan on the turnover of the land.
This certainly hadn’t been the case in the boom.
The presence of hobby farmer buyers had also served to raise prices to an unsustainable level. Prices of up to €30,000 per acre marginalised those with limited means.
The two-thirds drop now makes it easier for young farmers to expand, while improved agricultural incomes allow them to earn enough to pay back borrowings.
And that hasn’t been lost on the banks, who are choosing their investments very carefully, but are putting forward funds for farm expansion or acquisition.
The recent changes in stamp duty should go some way to bring in long term investment in the market. Down from a high of 9%, to 6% in the last Fianna Fáil budget, and to 1% or 2% in the recent Michael Noonan production, has effectively removed a penalty for investing in land.
Anyone investing their shivering euros in land not only gets to keep something that won’t need painting, but can sell it in seven years times, and walk away capital gains tax-free.
This should offset the flight of money from the land, but will probably only attract farmers to any real extent, with the odd purchaser of very long term investment land, which should not upset the delicate balance of value to productivity which exists at the moment.
The incentives are there too for existing farmers, even if they still feel hale and hearty, who are being given strong financial incentives to pass on the torch before they reach 66. Money is always a good incentive, and both the civil service and the agricultural sector could see a wave of relatively young pensioners too. Although farming is something of a vocation, and it remains to be seen if Noonan’s early farm transfer incentives work.
At the moment, only 7% of Irish farmers are under 35 years of age, while the cohort of those over 65 and still farming is at 25% — statistics which are seen as impediments to reaching targets set for Food Harvest 2020.
According to one farm consultant, young farmers get their farm in one of three ways — when they get married, when they are just under 35 and still qualify for young trained farmer incentives, or when the old fella is in a 7’ by 2’ box.
The necessity to bridge that gap has led to a relatively soft approach to farming in the recent budget, and judging by the favourable reaction from the sector’s organisations, (only marginal whingeing), the new arrangements are a winner.
The boost in early transfer of farms and businesses is just one of the government’s incentives in the bid to increase our food exports from €8 billion to €13 billion by 2020.
Big farm sales continue to make news as the year draws to a close; negotiations to sell Caherduggan Demesne, above, a 270-acre dairy farm at Ballincurrig in east Cork, are believed to be at about €4.7 million.
