Rising value of farmland sees investors return to market
With the increasing levels of investment in farmland by those who are not farmers, Ireland is also seeing a rise in the numbers of tenant farmers.
During the Celtic Tiger years, the investor was everywhere in the rising market and investors are increasingly present – possibly more than ever before.
The difference this time, however, is that where in the past, investments were into a rapidly rising market, today’s investor in agricultural land in Ireland is more likely to be someone looking for the longer gain rather than the quick profit.
The continuing rise in average prices, however, is drawing in more and more investors and that’s a situation that’s unlikely to change, with land investments remaining a more attractive proposition to investors. That mixture of strong steady (and rising) yields combined with a level of security that few others options can offer. At least, that’s the perception of the market.
“Land is still an attractive option, considering the way that interest rates have gone and the shakiness of the dollar,” says Andy Donoghue of Hodnett Forde Property Services in Clonakilty. “We have a 150-acre dairy farm coming on the market in Minane Bridge, and it will be very interesting to see who’s out there for it. We do anticipate a lot of investors bidding for it, alongside existing dairy farm operators who are looking to scale up and expand… we’ve a lot of enquiries already from both camps.”
One of the dangers of the increasing levels of investment in farmland by those who are not farmers is the spectre of one sector or even one person owning an inordinate amount of agricultural land and of the numbers of tenant farmers increasing in number. That is already an established trend, in spite of the high figures now regularly being paid for land leasing.
That’s a broader question and one that has to be addressed by those in power. When the Land Commission disappeared, many feared that the proverbial baby had been thrown out with the bathwater. There are countries (such as Europe’s largest agricultural country France) where farmland is still ringfenced for farmers and isn’t available to investors.
One Irish investor, in particular, is rumoured to have purchased in the region of 11,000 acres and is still amassing more land. The question has to asked whether or not this is a good thing for Irish agriculture or for Ireland in general.
Policies around tackling climate change and protecting the environment have also been playing their parts in fuelling demand for land and this is particularly true in the dairying sector.
The derogation system in relation to dairy farmers and their use of nitrates has seen ever more complex layers of regulation introduced in the last few years. These have often created confusion amongst those in the dairying sector but the net effect has been to push dairy farmers to seek more land as a matter of survival.
In order to get around the problem of the derogation system, dairy farmers have a number of choices. Buying more land is one of them and it’s the one that they tend to take, with the choice of reducing their herd numbers being the very last one they will consider.
The general thrust of government and EU policy is to have less nitrate use and less concentrated numbers of cows in Ireland. That isn’t going to change any time soon and the demand for land from the dairying sector is only set to increase in the coming years.
“There’s still the unknown issue regarding herd numbers,” says Andy Donoghue of Clonakilty-based auctioneers Hodnett Forde Property Services, “and in tow with derogation and emissions and all of that, there’s quite a bit of grey area… what we’re seeing in terms of leasing is that from the landlord’s point of view, they seem to be encouraged to go into longer-term leasing arrangements. Where four years and nine months would have been the norm, we’re now seeing that creeping up to ten years.”
“The derogation situation seems to be an important factor,” says Éamonn McQuinn of Tralee-based McQuinn Consulting. “The dairy farmers are the ones driving it – they need the extra ground. If the right farm comes up, they’ll pay a premium… It will be interesting to see what comes of the rental market this year.”
