Hampered supply leads to moderate fall in agricultural land values

Irish agricultural land values dipped by 0.5% in the opening quarter of 2016, following a moderate fall of 0.2% during the final quarter of 2015. This compares with growth of 1% in quarter one of 2015.

According to the analysis carried out by Sherry FitzGerald Research, the average price of farmland in Ireland stood at approximately €9,750 per acre at the end of March, on par with values recorded in the opening quarter last year. 

Fluctuations continue across the various regions; land values are mostly trending downwards with the exception of two regions, most notably the Midlands, which witnessed modest upward price movement of 0.7% in the quarter and 3.4% year on year. Furthermore, values in the Mid-East region grew by 0.4% in the three month period. 

In contrast, the Mid-West recorded a 1.9% reduction in the average price of farmland in the quarter, followed by the Border region at 1.5% and the South-West at 1.4%. Notably, the Border region witnessed a fall in all types of land values in the three months to March 2016. 

The opening quarter of 2016 saw a slight dip in prices in all of the three main types of land. Prime arable land values witnessed the largest fall in the quarter of 0.7%, to stand at approximately €11,600 per acre. Prime grassland values fell by 0.5% and marginal grassland, 0.3%. 

While large parcels of land in Ireland, 100+ acres which include a residence, witnessed a moderate decline in average values during the first quarter, such parcels were 1.4% higher year on year. This rise is most notably driven by price inflation in the South-East. 

Commenting on the market, Roseanne De Vere Hunt, Sherry FitzGerald said, “Land prices fell back this quarter, largely due to hampered supply levels on the market. Following what was one of the wettest winters on record, most land sales have been delayed until late April/May. Prices are expected to stabilise in the coming quarters due to an anticipated increase in stock coming to the market.” 

Commenting on land in the better-performing Mid-East market, Padraig Sherry, Sherry FitzGerald Sherry, Dunshaughlin said, “Demand for agricultural land is somewhat stronger in Co. Meath, supported by limited supply and pent-up demand from neighbouring farmers, investors and recreational land users. Due to the close proximity to Dublin, demand for small plots of approx. 15-20 acres from both local and Dublin-based clients has increased. Small plots can vary from €10,000 per acre up to as high as €15,000. In terms of larger blocks of 100 acres upwards, demand has increased from both domestic and overseas investors who see agricultural land as a safe haven for investment. Large commercial sized holdings can achieve €12,500-€15,000 per acre, depending on if there are outbuildings on the farm or not.” 

When analysing sentiment in the marketplace at present, almost half of surveyed respondents regarded activity levels to be somewhat stable in the opening quarter. Furthermore, the past twelve months have seen a rise in the share of respondents reporting a decrease in activity, standing at 33% in the opening quarter. In contrast, just 12% reported an increase in activity over the three month period. 

It appears unlikely that the agricultural land market will experience the same level of price growth that was evident in 2015, due to more cautiousness in the marketplace, coupled with reduced activity stemming from a reduction in supply.