Market for farmland sails on through the doldrums
AS demand for housing and development land languishes in the doldrums, awaiting the next fair wind, the market for agricultural land sails on.
All the more impressive is that it isn’t a boom market, with the kind of spectacular economic growth that only raises suspicion due to our painful experience of a property boom hard landing.
Prices for good quality farmland are hovering at €10,000 to €12,000 per acre. There are still many pockets in Munster where figures rarely go above €9,000 per acre.
According to most agents, the most sought-after size of holding seems to be of the order of 25 to 30 acres.
This sort of block is feasible to purchase either as an extension to an existing holding, or as something that can earn a reasonable amount by letting it, and it is also within a more affordable price range.
The larger self-sustaining viable unit of 100 acres and more is, apparently, the next most sought-after property type, as a general rule. There are, of courses, exceptions.
A holding of good quality pasture land just outside Lismore in Co Waterford was recently sold at auction for just under €15,000 per acre. This was a 57-acre non-residential holding without quota or entitlements. Falling between two stools, this kind of property is normally not so hotly contested, but this was an example of the growing hunger that’s out there for land.
Although the demand appears to be increasing, prices are not surging accordingly. “The speculator has completely disappeared from the market,” says Anthony O’Regan of the Cork office of auctioneers Keane Mahony Smith, who points out that while speculation drove up farmland prices up during the height of the boom, the peak was not as pronounced as it was with the housing market.
“Why land has come back so well is because even the people buying it have changed completely,” says another agent based in the mid-Cork region, echoing similar sentiments.
“The hobby farmer is gone. It’s the real agricultural professionals that are back in the market now, buying ground, and they won’t pay over the odds for it. Another point is that the cost of improving ground and reclaiming it has come back a lot.”
With the final phasing out of milk quotas to come in 2015, criteria for land valuation are mainly location and grazing ability, rather than milk quotas. It’s all coming back to location, convenience value and quality of land.
“Because of the fact that the milk quotas are expiring, a lot of people are looking a fresh look again at going back into milk,” says O’Regan. “Location is a prime part of the whole thing, ease of access, road frontage, that sort of thing.”
Alongside this is the curious fact that prices for milk quotas are now as high as they are likely to ever be. That something destined to be worthless in a few years can now sell for up to 56 cent per litre (in the milk quota trading scheme) seems to be a major anomaly in itself. But it reflects the battle for market share is going on out there.
Dairy farmers looking to take full advantage of the imminent liberalised market need to start increasing their production in advance without suffering any costly consequences of a superlevy fine for exceeding their permitted milk production.
Traditionally, the auction room is where to find the price, and sell land, when the demand is there. Over the last three to four years, however, auctions have become rare. The auction rooms are still not the bullishly confident places of old. Few of the legendary boom-time auction-room “encouragements”, such as the strategic bidder, seem to be used as they once allegedly were. Instead, auctions are carefully assessed beforehand, and a lot of property is being sold after the public event.
During pre-boom times, fees for land sales were 3% and, going back a bit further in time, were as high as 3.5%. The increase in sales volumes put downward pressure on those figures, and the auctioneering fraternity has emerged into a more slimmed-down world of fees, where payments of between 1.5% and 2% are the norm. This would still represent a considerable sum — a sale of a 30-acre holding, for example, would typically yield fees of between €4,500 and €6,000.
“A lot of sales are being done or finished by private auction,” notes one agent. “We’re not at the stage yet, in my opinion, where you can put up most land sales for public auction. But we are almost there.”
If sales are progressing well, what are the conditions like when it comes to conveyancing?
The legal changes that have obliged land owners to re-define their time-established rights of way have wreaked a certain amount of havoc with regard to smaller holdings and rural residential transactions, and they have also had their impact on some agricultural land sales.
“The legislation hasn’t come through yet, so we are expecting it to be an issue,” says one auctioneer, who speaks of the sort of case that is indicative of this problem. “We did have one residential case with a gravity-fed water supply down from a mountain, and where the owners were a couple separating acrimoniously. The sale was agreed, but the purchaser’s solicitor wouldn’t accept that there was a good legal right of way to the water pipe. So in the end, a new well had to be dug on-site, in order for the sale to go through.”
Some auctioneers take an opposite view, pointing out that solicitors have a lot more time to deal more effectively with any potential problems. “I think that conveyancing is actually after improving, because solicitors have a lot more time on their hands,” says another agent. “The main problem is actually with the new digital maps. They’re very accurate, but for some reason, they don’t show any acreage on them. If you’ve a farm for sale, you nearly have to get an engineer to make an accurate calculation.”
