What is the market like generally?

Scarcity is the overriding feature of the farmland market in Northern Ireland for 2020. In the last year, our farm sales in Northern Ireland achieved an average premium of 15% above the asking price and 78% were sold with competitive bidding. The decisive UK General Election result in December 2019 and the return of the Northern Ireland Executive in January 2020 saw greater political certainty early in the year.  However, Covid-19 has delayed the market and has resulted in many potential sellers putting their plans on hold for 2020. Since the travel restrictions have lifted and viewings can take place, we have received bids for land in excess £10,000 per acre from multiple buyers. Despite pressure on agricultural profits and the wider economy, the scarcity of supply is underpinning the average value of farmland in Northern Ireland, which continues to sit at around £10,000 per acre. However, the gap between prime arable land and poorer quality land has widened.  

Much of the country’s population still has close connections with farming and there continues to be a strong appeal with owning farmland.

What’s selling well, and why?

Quality, scale and location are the three key factors driving prices. Buyers are prepared to pay a premium for land which already has a good infrastructure and requires limited capital investment, especially if it has the versatility to grow a variety of crops.  Equipped farms which are in excess of 100 are perceived to be viable as a standalone unit and will generate demand from further afield.  Location is important to local buyers, where they are prepared to pay a premium if the land is situated within close proximity to their existing unit due to economies of scale and marriage value added.

Realistically priced farms give buyers confidence that there is a committed seller and often encourages a buyer to take the extra step, in the belief that it will be sufficient to secure the purchase.

Diversified farms are becoming more attractive as buyers are attracted to the security of an additional income. 

What’s coming to the market, and why?

The most common reasons for sale continue to be death and retirement, with the occasional sale arising due to relocation. Many potential sellers who have the ability to hold off selling until 2021 (those retiring or relocating) have mostly chosen to do so. It is only those who either have to sell or have the vision to benefit from the scarcity factor who have chosen to go to the market this year.

As the majority of the farms are being sold due to death and retirement, it is unsurprising that the majority of the farms reaching the market require investment.

Can you give us an idea of average values for arable and grassland and so on?

While average values are consistent on a national level at just under £10,000 per acre, regionally, they can vary widely and similar blocks of land in a local area can differ in value, depending on their combination of attributes. Large blocks of land (over 100 acres) command a higher price per acre due to the rarity factor. Values are highest in the southern half of the province, where there tends to be a higher proportion of non-farming buyers. Meat and dairy in Northern Ireland make up a larger proportion of agricultural output than other parts of the UK and buyers from these sectors will compete with arable farmers for smaller blocks of prime land, with up to £15,000 per acre being paid for the best land.

Buyers are taking into consideration all the farm’s attributes (such as extent, quality, situation, infrastructure and buildings, diversification, Entitlements to the Basic Payment Scheme, etc) before bidding. This is particularly the case if the buyer is relying on bank funding.

What buyer types are you seeing?

Business people/investors continue to dominate the market with non-farming cash funds for large farms. In addition to offering commercial viability, they can also provide privacy and rural living, which is becoming more popular since Covid-19, especially form buyers with Northern Irish roots but who are currently experiencing city living elsewhere. A particular feature of Northern Ireland is that the entire province is accessible to the capital city of Belfast and its airports. Buyers are therefore attracted to farms which have a good house, or the ability to create one, to enjoy the benefits of having a country lifestyle. In addition, they recognise the taxation advantages and price stability offered by owning farmland. Buyers of larger farms recognise that they are unlikely to secure the required unit in their local area so often come from further afield. Progressive farmers are dominant for smaller blocks of bare land.

Similar to the rest of the UK and Ireland, land which has the potential to be planted in trees is achieving premium prices.

70% of our transactions in the last year were funded in full by cash.

What is the demand/supply like?

Annual supply is often less than 1% of Northern Ireland’s total area of farmland, with the average size usually between 30 and 40 acres. Typically, between 1 and 3 farms greater than 100 acres are offered for sale in each county, while farms over 200 acres offered for sale are a rare commodity throughout the country. Land owners who are not farming the land often have a preference to let it through Conacre and retain their family home, rather than sell. Combining this with political uncertainty (due to Brexit) and the uncertainty arising from Covid-19, supply is presently the lowest it has been for many years. This is particularly the case for standalone, viable farms, with active buyers having an extremely limited selection to choose from presently.  

Demand remains strong for smaller parcels of bare land as local buyers take a longer-term view, recognising that the opportunity for them to buy the land may not arise again for a very long time.  

The scarcity factor, couple with the reasons to buy set out above, is resulting in competitive bidding for virtually every large farm which comes to the market.

Can you offer a comparison of acres/farms launched and sales to this time last year?

The quantity and quality of the farms offered for sale in has noticeably reduced this year for the abovementioned reasons.

Looking ahead to the rest of 2020, what can we expect from the market?  

Agriculture continues to contribute to a larger part of the economy in Northern Ireland than the rest of the UK and much of its population have close roots to farming and the countryside. Farmland will continue to be a sought after commodity from those currently farming and needing to expand, wealthy buyers drawn to rural living/owning a farm and investors seeking a secure asset with a solid reputation.  However, the current uncertainty will cause buyers to be price sensitive/cautious about overpaying, resulting in a requirement for competitive bidding to ensure that sale prices are maximised.

Supply is likely to remain very tight and best in class farms will attract competitive interest and premium prices. Those who are prepared to go to the market now are likely to steal a march on other sellers who wait until 2021. 

Does Savills have any newly released land to the market at the moment in Northern Ireland?

We have just launched a 139-acre mixed arable and livestock farm in County Down – learn more here. During my career of selling farms in Scotland and Northern Ireland, it is one of the best maintained that I have been involved with selling.

Any final thoughts?

My colleagues in our Scottish offices are reporting a solid number of enquiries from Northern Irish buyers who are attracted to the lower average land values in Scotland. Progressive farmers may be comfortable with renting land in the short term to remain viable but they aspire to hand over to the next generation a viable business which they own outright. I believe that the requirement for more acres to improve margins, combined with the restricted opportunities to acquire more land locally, will result in more Northern Irish farmers looking to sell up and more further afield. While their preference may be to stay in Northern Ireland the limited supply of large farms and the ability to buy more acres for the same price in other parts of the UK is likely to see an increase in the number of sellers going to the market to relocate.

James Butler is Head of Country Agency with Savills Ireland.