A tough year but there’s nobody panicking
It’s true that the summer was the coldest and wettest on record in an industry that is more weather-dependant than most and it’s true that this has represented a financial set-back for a number of farmers. But in farming, it’s the long-term forecast that counts and most analysts believe that the current hiatus being experienced by some is very much a transient phenomenon.
“Land prices haven’t dropped at all,” says auctioneer Richard Ryan of GVM in Kilmallock. “We’ve gone through a hard year and that has dampened farmers’ spirits somewhat but that will be short-lived... and farmers are positive-thinking people, generally speaking.”
“Over the last 12-18 months, it’s the one sector of the property market that has been quite active and that has reflected in an increase in prices,” says Joe McCarthy of Irish & European Holdings in Cork city. “During 2011, it was about 12 to 13%.”
Banks Show no Signs of Lessening Confidence in Agriculture
For the last two years, the lending agencies have been slowly emerging into the real world after the hurricane of the series of global financial crises and it’s to the agricultural industry that they have turned first and foremost.
“After the last few good years, this year has thrown a dampener on things; there’s no doubt. But I think that the banks themselves realise that and agriculture is something that you have look at in terms of five-year plans and you’ll have good years and bad years within that. The farmers have had a good innings over the last three years and there’s no doubt but that the banks are supporting food and agriculture,” says McCarthy.
Prices Holding Steady
Good quality land is fetching up to €12,000 per acre at the moment and, while prices have been no more or less than steady over the last six months or so, many expect that this current pause will be short-lived and already there are signs of the agricultural land market continuing its inexorable and steady rise.
“For good dairying land, we’re up around the €12,000 to €14,000 per acre,” says McCarthy of Irish & European, “but that would be for a viable holding of 150 acres or more. We’re living in a time when food and agriculture are in big demand. The indications are that the farmers that are looking at dairying as being the way forward. You’re not as dependant on weather in dairying as you are in tillage, for example.
“Our agricultural industry is one of the most important to the country and that’s being recognised not only by governments, but also by the banks.”
Still the Shining Light
“Agricultural property is the one shining light in the property market,” says Tom Spillane of Tom Spillane & Co in Killarney. “It’s holding up even after a bad summer. There’s still a demand in Kerry certainly for agricultural land.”
In his area, the farming activity is quite mixed, involving the normal melange of dairying and tillage, particularly in the south and mid-Kerry regions with their mixtures of rich pasture land and hilly territories.
“Good land will always make a quality price, at the same time,” he says. As if to illustrate the point, he is currently selling two farms of strong diversity; one is a forty-acre holding in the Rathmore area with a dwelling in need of refurbishment, whilst the other is a compact 60-acre residential holding adjacent to Charleville Golf Course, being sold jointly with GVM Auctioneers in Kilmallock.
“Over-the-Fence” FactorImportant to Land Prices
“Land prices can vary considerably,” says Richard Ryan of GVM, who says that size can be an important factor with parcels of 10-12 acres fetching stronger per-acre prices in his area than larger parcels, as a general rule.
But one of the most significant factors of all is the question of who is over the fence: “A major factor in land sales is the question of who the neighbouring farmers are. If you have quite progressive farmers bounding the land for sale, it will always be a good seller if they’re thinking of expanding. Whereas, if you’ve a parcel of land and the land around it is rented, then there might be less of an appetite for it.
“A farmer will always pay more for land that’s over the ditch because it’s so convenient. If you factor in the costs of fuel, transporting stock and time involved, it makes a big difference.”
Land for Lease Getting More Scarce
“The whole farming sector is in a state of flux at the moment,” says Eddie McQuinn of McQuinn Consultants in Tralee. “CAP reform is under way and it’s having an effect on the land market, whether it’s to buy land or to sell it or lease it.”
The leasing market is just beginning at this point of the year and already”, says McQuinn, it is noticeable that a lot of land-owners are not putting their land on the market.
“They’re trying to retain their land now – and even, in some cases, they’re trying to break their leases – because there’s a chance that they could establish entitlements on it under the new CAP reform.”
For those who would have missed out on valuable entitlements in the past (due to the fact that their land was leased out), there seems to be a particular determination not to be caught out again and entitlements are worth a considerable amount of money payable over a long term.
With Ireland set to take over the EU presidency in January next, negotiations are to follow on the next round of CAP reform and be concluded by the end of 2013.
“The landowners that felt hard done by the last time are determined not to have it happen again and they’re withdrawing a lot of land from the lease market and intend farming themselves. Therefore, there’s going to be a chronic shortage of land and prices are going to rocket.”
There is already some evidence of this overheating in the lease market, with prices getting €300/acre for a ten-year lease. On top of the well-documented pressure for expansion from the burgeoning dairying industry, this is another factor that is maintaining upward pressure on land prices that will be felt over the coming years.
