Chester is surrounded by open countryside and the agricultural land market plays an important role in the area. Moving on from our last article about the residential market, we consider the current state of the land market.
There is continued optimism across the agricultural industry. DEFRA has unveiled plans to restore 300,000 hectares of wildlife habitat, including existing woodland and peatland restoration, as well as setting a goal of having up to 60% of England’s agricultural soil managed under an environmental scheme by 2030. Such a target suggests a direction towards encouraging farming practices to be both productive and environmentally sustainable.
With greater environmental pressures, the need to protect and enhance our natural environment is paramount. Farmland will play a critical role in delivering many of the targets set out in the Environment Act, with carbon capture, conservation and offset opportunities gathering significant attention from a wide spectrum of investors.
Demand is expected to increase through 2022 and with low stock levels, prices remain strong. Such demand is seen from tax-driven ‘rollover’ buyers leading the way with larger-scale commercial farm opportunities to the smaller-scale operators, who continue to seek additional land in the locality to spread their fixed costs. The treatment of agricultural assets for Inheritance Tax purposes (APR) will continue to support such decisions for inter-generational businesses. Whilst low interest rates have traditionally allowed such buyers to borrow efficiently and with a lower serviceability burden, the rising interest rates will test buyers resolve against strong prices.
With the evolving market for conservation purposes, carbon investment and offsetting opportunities, the number of corporate and private non-farming investors is increasing. They demand larger-scale upland and hill farms for woodland plantations and afforestation, which heightens demand for these poorer, less productive, and typically less valuable, land holdings.
Non-farming, lifestyle and amenity buyers will continue to drive demand for smaller residential farms and bare land opportunities. Demand has been strong in the event of COVID as buyers seek to move to the countryside away from the urban areas.
It is yet to be seen whether economic factors will stem demand but with a noticeably low level of property available and high demand, history has shown that the housing and land market will continue to show growth and prosperity as we carry momentum into 2022.