Land Price Bubble

midlandslad

Member
Location
Midlands
Does anyone else feel we are heading towards a land price bubble?

Most land agents will tell you that they aren't making anymore BUT to the best of my knowledge they have never made any land on this beautiful isle, however we have never seen prices rise at such rates.

It wasn't many years ago that it was very difficult to sell good commercial farms. Now we are seeing values over 12k/ac consistently. Are people buying into farmland as it is the current investment hotspot and following the upward trend?

With agricultural borrowing at an all time high does everyone feel debt levels are susceptible to drops in farm income, increases in the base rate, reductions in support,etc.

It would be interesting to here peoples thoughts.
 
Location
Devon
Land bought today will seem expensive ( and unaffordable farming wise ) and that is very true but at the same time land bought 40/50/70 years ago was viewed the same by that generation and look what a great investment that has been ( which has always been the case ) short term land may drop but if you are sure you can afford it (and make the payments in difficult times ) then land will ALWAYS be a good buy..
 

midlandslad

Member
Location
Midlands
It wasn't many years ago farms were only breaking even but now on the back of a few good years profits they are borrowing large sums over long periods. These businesses need to make repayments every year through good and bad and if they are making capital repayments this is post tax!
 

GTB

Never Forgotten
Honorary Member
It wasn't many years ago farms were only breaking even but now on the back of a few good years profits they are borrowing large sums over long periods. These businesses need to make repayments every year through good and bad and if they are making capital repayments this is post tax!
True. but the last thing anyone needs is falling land values. Those who have borrowed don't want to be in negative equity and those who would like to buy wouldn't get a loan if land values were falling.
 

Walterp

Member
Location
Pembrokeshire
Does anyone else feel we are heading towards a land price bubble?
Answer: we have had a land price bubble ever since grade 3 started heading North of £3,000 per acre, which must be at least a decade ago. (I remember sitting in The Swan (?) in Henley-in-Arden one evening in 2004 and watching 70 acres of grade 3 at Bishop's Itchington struggle to achieve over £2,000 per acre).

Of course, it is accompanied by a residential housing bubble (started before the LPB), a gilts bubble (after the LPB) and, probably, an equities bubble (both before AND after the LPB).

For those expecting commercial reality to be restored, I would refer to J M Keynes' famous remark about markets being able to stay irrational longer than you can stay solvent.
 
Last edited:

Y Fan Wen

Member
Location
N W Snowdonia
I was at Harper in the 60's and the farm next door came up for auction. The principal was desperate to add it to the college farm and he accompanied the rep from the Dept of Education to the auction.
The rep dropped out at 275 and the hammer price was 300 to a farmer 6 miles away.
At our next finance lecture, the lecturer gave us the task of working out a management budget to service that loan, 300 x 300 acres = 90,000 and we couldn't. He agreed that it wasn't possible.
 

Goweresque

Member
Location
North Wilts
Monetary authorities the world over have made it very clear that the response to the 2007 Financial Crash would be to print money, and keep printing it until asset prices stabilised, which is exactly what they have done. They are petrified about allowing deflation to set in, which would be a downward spiral of reduced asset prices, defaults on loans, bank debt write-offs, bank insolvencies etc etc. Thus if there so much as a hint of economic recession they will print more money and inject it into the economy. Farmland is one of the first assets that is hit by the wall of printed money, being both a business asset (and thus subject to very favourable tax laws) and is easily traded, and owned, by non-farming people. Anyone who has just made a killing in the City can buy a big estate, put it in the hands of an agent, and sit back, safe in the knowledge their money is not in a bank any more. If the authorities get out of hand with the money printing at some point and create hyper-inflation, then owning a real asset will be far better than owning cash, which could be worthless inside a very few years.Farmland has the added advantage that it produces food, which doesn't go out of fashion.

Its a no-brainer really. The only scenario that makes land ownership a bad deal is deflation, and that scenario turns the Western world into a Mad Max wasteland. So it will not be allowed to happen, even if it takes printing enough money to make land £20, 30, 40k/acre.
 

Grain Buyer

Member
Location
Omnipresent
as a non land owner looking in, I can't help but scratch my head. Land is going UP in price, you all OWN land, on paper you are all RICHER. As Clive said, it's only an issue if you are a buyer or a seller, otherwise it's only value is the crops it can produce (unless you count borrowing against it as value creating). If you want more acres why not sell your expensive land and move to a cheaper area/ country? If I owned land I'd want it to go to 20k/40k/60k, why do you want it to drop?
 
otherwise it's only value is the crops it can produce

No it also is a very safe long term haven for money and a massive inheritance tax planning device. When you see the sums being spent on top properties in London by foreigners looking for a safe haven (and we are talking £25 - 100 million per house) for their money - why wouldn't you invest some of your money from the sale of such a property in a farm? A few million is chicken feed to these people.

Land prices aren't just about farming, land has an investment, financial planning and an amenity value as well. The later reasons (to some people) can be more important than the profit from farming.
 

Grain Buyer

Member
Location
Omnipresent
No it also is a very safe long term haven for money and a massive inheritance tax planning device. When you see the sums being spent on top properties in London by foreigners looking for a safe haven (and we are talking £25 - 100 million per house) for their money - why wouldn't you invest some of your money from the sale of such a property in a farm? A few million is chicken feed to these people.

Land prices aren't just about farming, land has an investment, financial planning and an amenity value as well. The later reasons (to some people) can be more important than the profit from farming.


yes, I am in total agreement with you, and just another reason why land owners should rejoice at land prices going up, I can't see any benefit to it dropping. Just saying, while you hold bare land, it's only day to day use is to produce x y or z.
 
Location
Devon
I was at Harper in the 60's and the farm next door came up for auction. The principal was desperate to add it to the college farm and he accompanied the rep from the Dept of Education to the auction.
The rep dropped out at 275 and the hammer price was 300 to a farmer 6 miles away.
At our next finance lecture, the lecturer gave us the task of working out a management budget to service that loan, 300 x 300 acres = 90,000 and we couldn't. He agreed that it wasn't possible.

And what is that farm worth today??.. it was unaffordable then as land is today but in the long term its very hard to find a safer/ better investment than land/ farms..
 

rob1

Member
Location
wiltshire
back in the early 60's when my family bought our farm off the landlords it took ten tonnes of wheat to buy an acre and about eight to buy a db 880. Does anything else need saying about whether its affordable?

Part of the reason land has rising so much lately is that there is not enough things in the world for people to invest in that is safe. Too much money from pension funds building land sales, oil revenues etc from other parts of the world all looking for a safe home. There is a limited supply of Stocks and shares and their value is somewhat dependent on the actual performance of the company, gold has traditionally been the safe haven in troubled times but isnt that much use in reality and of course there is the tax advantages of land and many people want a nice country estate to show off. And with the long term demand for food bound to rise perhaps one day those who buy can make it pay, but at the moment I can make a much better return from elsewhere in my business, just cant see the sense of buying something that never will pay for itself until its sold and the interest currently is greater than its gross return
 

SFI - What % were you taking out of production?

  • 0 %

    Votes: 81 42.2%
  • Up to 25%

    Votes: 68 35.4%
  • 25-50%

    Votes: 30 15.6%
  • 50-75%

    Votes: 3 1.6%
  • 75-100%

    Votes: 3 1.6%
  • 100% I’ve had enough of farming!

    Votes: 7 3.6%

Red Tractor drops launch of green farming scheme amid anger from farmers

  • 1,294
  • 1
As reported in Independent


quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

read the TFF thread here: https://thefarmingforum.co.uk/index.php?threads/gfc-was-to-go-ahead-now-not-going-ahead.405234/
Top