Land values: Current trends and warning signs for times ahead

The effects of Covid-19 on land values in Ireland have been shown to be minimal
Land values: Current trends and warning signs for times ahead

Trends for farmers to watch out for in terms of possible impacts on land values include Brexit, CAP reform and, of course, the continuing Covid-19 pandemic.

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A number of trends have emerged over the last nine months or so – some of which may have an impact in the months to come. But there are some negative developments around the corner too and these need to be taken into account and counterbalanced to ensure against future shocks.

The effects of Covid-19 on the agricultural land market in Ireland have been shown to be of an inconsequential nature. The omnipresence of the virus and its associated Governmental actions has, however, masked the presence of the other elements and phenomena that will shape the market over the coming months and years.

Top of the list is the issue of Brexit. It hasn’t simply gone away and recent headlines pertaining to British Government back-pedalling on international-agreed treaties have served as a timely reminder that this issue is still very much a live on that has a very direct impact on Ireland’s agricultural industry; and, by extension, on the price of agricultural land.

To date, Covid-19 and Brexit have had little impact on land values in Ireland.
To date, Covid-19 and Brexit have had little impact on land values in Ireland.

“Brexit is a far more serious problem,” says Michael Brady. “As far as I’m concerned, the three biggest factors that are going to affect farmers’ purchasing power are the following: Brexit first of all. That’s the biggest risk for Irish farmers; Next is the new EU CAP reform, which is starting in 2023; the pandemic is the third most important one. And, by the time Brexit finally beds down and by the time the new CAP reform is in place, we’ll have probably forgotten about the pandemic.” 

Cork city auctioneer Thomas J O’Driscoll has also witnessed a year in which Covid-19 has had little or no impact but where the supply of good quality land in the East Cork area has been stemmed somewhere by the uncertainty surrounding both Covid and Brexit.

Mr O'Driscoll said: “It depends on the area you’re in but for good quality farmland, there’s very strong demand. I myself thought that prices might have softened but it’s going the opposite way… There aren’t too many good quality farms available, particularly in the Cork region compared to other areas. 

"People are waiting to see what’s going to happen with Brexit and with Covid. Many are holding back and hanging on and many who have made the move (to put their land on the market) have benefitted from it.” 

The potential problems that Britain’s exit from the EU has held for Irish agricultural exports was, until the pandemic, very much front and centre of news bulletins and with negotiations over the minutiae of just how Britain trades with the rest of Europe thrown into the air once more, the spectre of a difficult trading situation with our largest market hangs over the agricultural scene like a persistent cloud.

While that remains out of the hands of most of us in the country, one positive result from the fiasco has been the emergence of a new market segment of buyer in the form of farmers looking to move their operations out of the UK and into the EU in Ireland.

Macroom-based auctioneer Killian Lynch has witnessed the phenomenon of the “person moving from the UK from some form of farming enterprise that is looking to acquire a house and a large portion of land here is well. They’re there and quite active now.” 

This phenomenon the British and/or British-based Irish buyer moving lock, stock and barrel to Ireland is one that we may see more of. For most UK-based potential buyers, quarantine restrictions have forced them to stay put but a determined number of them have been active – keen to run a farming business in an English-speaking country in the EU rather than remaining in the UK.

“This has been more a result of Brexit than of the virus,” says Killian Lynch, who has noted this aspect of the market as a new development. “We’ve seen two farms in particular where there were UK-based farmers looking to come over.” 

Trevor McCarthy of Irish & European’s Cork office, who says purchasing land remains an attractive option in terms of tax efficiencies.
Trevor McCarthy of Irish & European’s Cork office, who says purchasing land remains an attractive option in terms of tax efficiencies.

Investors returning to the land market with interest 

The investors – in their myriad forms – have been making their presence felt in the land market throughout the year and this sector is certainly one that is growing, with all auctioneers noticing their increasing influence on land prices.

“I’m getting plenty of enquiries from people looking at land as an investment,” says Trevor McCarthy of Irish & European’s Cork office. “Certainly with the tax efficiencies that are in place for leasing land long-term, it’s appealing to a lot of people. As well as that, there’s still a lot of cash in the banks and there’s no return being generated by the banks.”

Richard Ryan of GVM Auctioneers in Kilmallock, Co Limerick, says land is always considered to be a safe investment.
Richard Ryan of GVM Auctioneers in Kilmallock, Co Limerick, says land is always considered to be a safe investment.

 “Land is considered a very safe investment,” says Richard Ryan. “Long-term leases are good from a taxation point of view… we’ve come across a few cases where people have said that they would rather have a ‘mud bank’ than a ‘money bank’.” 

Auctioneer David Keane in Midleton is also seeing plenty of renewed interest in land as an investment: “Investors are definitely back on the field again,” he says. “To me, there are a number of people out there with money ready to go. Land isn’t coming back in price.”

 “There’s an increased level of interest in good agricultural land,” says Éamonn McQuinn, “and the people I’m seeing at the moment are mainly investors. It’s not so much guys looking to expand dairy herds or facilities… Investors are seeing agricultural land mainly as a safe bet, given what’s going on at the moment.” 

While McQuinn and most other agents are seeing this phenomenon occurring on a more human scale with investors being made up of relatively small operators, there are also the larger-scale investors, some of whose operations are so large that they have even set up a farming function of their own. Such is the case of Coolmore Stud, for example. 

They have purchased a lot of land in South Tipperary and much of their purchased acres are being farmed by the company themselves – mostly preferring to use for tillage rather than for dairying. The Middle Eastern equestrian moguls of Kildare have also been investing in prime agricultural land, normally using the formula of purchasing and leasing.

Continuing a well-established trend the South Tipperary area remains a strong hot-spot in Munster in terms of land values. Another substantial grassland farm has just come on the market in this area with Thomas V Ryan Auctioneers in Thurles; a 60-acre roadside holding 4km from the Rock of Cashel which is already assured of drawing another strong price.

“It’s prime Golden Vale land,” says Vincent Ryan, “just off the Dundrum Road.” The property is being offered in three lots but the asking price of €16,000/acre speaks volumes of the level of confidence that there is in the agricultural land market in these parts.

All this comes at a time when the Government has persisted with its Stamp Duty rate of 7.5% on agricultural land sales (increased just under a year ago from a rate of 6%) – described by some auctioneers as a “penalty tax on farmers”.

A surge in interest in dairy farming is playing a part in keeping land prices strong.
A surge in interest in dairy farming is playing a part in keeping land prices strong.

Renewed interest in the dairying sector

 According to Michael Brady, there has been a renewed interest in the dairying sector. This, he says, doesn’t have anything to do with Covid but is rather based on the investor’s behavioural cycle playing out since the ending of milk quotas in 2015:

“In technology adoption, there’s a curve… when something new comes out, you have the innovators, followed by the early adaptors and so on. At a certain point, you have those who have been waiting in the wings to see how the new situation plays out. I think you’re seeing those investors moving into the new dairying scene now.” 

The playing out of the pent-up demand and supply from the main Lockdown period continues, meanwhile, with the market remaining active in recent months at a time of year when it would normally be far quieter:

“August is normally our quietest month of the year,” says Michael Brady. “That’s from both a consultancy and an auctioneering point of view… there are no solicitors, bankers are normally taking it easy, as are everyone else. We don’t normally get a lot of new business in August. But this August was the busiest August I’ve ever had.” 

There is also the fact, of course, that dairying is ten times more profitable than beef and, sooner or later, someone thinking of getting into farming will be far more tempted to put their money in dairying than in beef or virtually any other sector.

“I’m getting a lot of enquiries from guys looking for marginal land,” says Éamonn McQuinn. “That’s mainly to do with the new nitrates regulations from the EU… A lot of the big dairy farmers are looking for marginal ground so that their average acreage per cow increases.”

 “There are still people moving into the dairying sector,” says Richard Ryan, “but I think that a lot of people who had been planning on doing it have already done it.” 

Trevor McCarthy sees more interest in dairying but the costs of getting into the sector from scratch can be a bit too rich from many people: “There are new entrants going into it but the difficulty for new entrants is the cost… It’s often prohibitive.” 

Clonakilty-based auctioneers Hodnett-Forde have witnessed a strong level of interest in agricultural land in West Cork, with a series of strong sales recorded over the last six or seven months. There seems to be a particular focus on the more modest-sized holdings, with interest coming from various sources, many of whom are investors rather than farmers:

“We’ve sold about 470 acres in total in the Bandon region in the last few months,” says Ernest Forde, with a lot of them small holdings that have sold between €13,000 and €17,000 per acre – some of which have been sold off-market.” 

“The price of milk within the Carbery Group region is an indication of why prices are good throughout West Cork,” says John Hodnett, “and over the past few months, we’ve seen an increased interest from investors, rather than farmers, who are buying land to let out to farmers… They’re all looking for good quality rentable land.”

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