Statements & Blogs

17 May - SCSI / Teagasc Report Land Market Review and Outlook 2016 highlights regional divergence

A new report highlights the growing divergence in the Irish agricultural land market with prices growing moderately in Leinster and Munster but declining in Connaught/Ulster.

The Society of Chartered Surveyors Ireland / Teagasc Agri Land Market Review and Outlook 2016 report says that the short term outlook remains mixed as commodity prices and uncertainty over Brexit weigh on the market. However more than half of the chartered surveyors who contributed to the report said they expect to see an increase in the volume of transactions in 2016 and also an increase in demand from purchasers.

According to the report the price of an acre on a holding under 50 acres in Leinster, with a residence, is now €12,700, an increase of 15% on 2014. The price of an acre without a residence, increased by 9% to €10,600. For larger land holdings the increases were around the 4% mark or lower. (Full details in table below)

The price of an acre on a smaller holding in Munster increased by 3% to €11K – with a residence – and €10K without. The most notable increase was in larger holdings over 100 acres with a residence, which saw a price increase of 11% to €11,400.

In Connaught/Ulster the price per acre fell in five of the six price categories. It was the second year in a row that prices trended downwards. The price per acre on a small holding with a residence fell by 6% to €5,800 while prices in medium and larger sized holdings fell by between 5 and 10%. However the price of an acre on a small holding without a residence rose by 10% to €6,200.

Thomas Potterton of the Society of Chartered Surveyors Ireland said the pattern of contrasting regional price movements had become a pattern in the last few years. “The Leinster region was the best performer in 2015 and prices for farm holdings in the province are now between 31% and 38% higher than they were in 2010. Overall price growth in Munster moderated in 2015 with prices for land holdings of between 50 and 100 acres experiencing the weakest growth in values since 2010”.

“In stark contrast to the other two regions prices in Connaught/Ulster are now well below those observed in 2010, the only exception being lands up to 50 acres without a residence, where prices are similar to those of six years ago” he said.

“Since the collapse of the economy, land prices have in general remained steady for the past two years, but as the farmer along with ‘lifestyle buyers’ and investors return to the market, the outlook seems positive and we could experience a 5% increase in values in 2016. However much will depend on the supply of land coming onto the market” Potterton concluded.

One of the authors of the report Jason Loughrey of Teagasc described 2015 as a mixed year overall with a slight decline in interest from dairy farmers and fewer cash buyers.

“The ending of the EU milk quota has been a key driver of demand for agricultural land in recent years and this was a motivating factor for some buyers during the first half of 2015. However the decline in milk prices during 2015 led to considerably less interest in this area and resulted in less market activity in the second half of the year”.

“The lack of good quality farms coming on the market and widespread flooding in the midlands also had an impact on supply. In fact poor weather conditions in winter and spring have led to increased feed costs for famers and this could impact upon land prices also in 2016” Loughrey said.

Brexit

According to the report the short-term outlook for the market is dominated by uncertainty over the profitability of the farming sector and the likelihood that agricultural commodity prices will remain depressed through 2016. One of the key factors causing uncertainty is the UK Brexit referendum which takes place on June 23^rd. While the report acknowledges the difficulty of measuring the economic impact of Brexit, it says that in the broad economic sense it expects Brexit to have negative consequences, given that one third or €4.5bn of our agri-food exports go to the UK.

Loughrey said that if Brexit occurs the effect it will have on Irish trade and on the Common Agricultural Policy may have a knock on effect on overall confidence in the land market.

“Ongoing uncertainty in the lead up to the vote is already having a negative effect on agri food exports due to the depreciation of sterling against the euro. It has lost 7 pence against the euro since the end of 2015. So Brexit is already having a dampening effect on lkieran@gordonmrm.ie

Teagasc; Contact Eric Donald 059 9183408 or 086 8381112

Eric.donald@teagasc.ie

Note to Editor

This is the third in a series of annual reports on the state of the land market produces by the Society of Chartered Surveyors Ireland (SCSI) and the Agricultural Economic and Farm Surveys Department of Teagasc. The report brings together the respective expertise of both organisations to increase the range and quality of the data that is available on the agricultural land market in Ireland. The land price data is based on survey responses from SCSI members around the country and is supplemented by interviews conducted with a selection of SCSI members actively engaged in the agricultural land market. The fieldwork for the survey was conducted between the 11^th of February and 3^rd of March 2016.

Agricultural land values in Ireland 2015

€ per acre and annual percentage change; based on land with no entitlements

Source: SCSI/Teagasc agricultural land survey 2016

Issued on behalf of SCSI by Gordon MRM

kieran@gordonmrm.ie