Roseanne De Vere Hunt, Head of Country Homes, Farms and Estates, Sherry FitzGerald
According to our Sherry FitzGerald Land Price Index, the national average was €9,500 per acre at the end of quarter two of 2017.
Irish agricultural land prices remained broadly steady in the opening half of 2017, following a full year of price deflation over the course of 2016. While no change was witnessed in the second quarter, the national average price of land saw a 0.3% rise in the six months to June, to reach €9,500 per acre. However, in the twelve months to June, average land prices were 1.5% lower, with all three types of land seeing the pinch over the year. The average value of farmland at the midpoint of 2016 was €9,650 per acre.
Anecdotal evidence suggests that confidence is once again picking up in the agri-land market, following 2016’s performance which saw prices fall by 3.3%, perhaps a result of the drop in profitability on dairy farms during the year. The past six months have seen a pickup in confidence in the sector, with farmers capitalising on rebounding milk prices, leading to a boost in demand in the land market. However, it may be the latter half of the year before this materialises into a more solid level of land price inflation.
Prime arable land showed the largest price increase in the six-month period to June, by 0.8% to stand at €11,400 per acre. Grassland and Marginal Grassland values, in contrast, remained unchanged during the period, with little uplift in demand evident for these two types of land.
Following three years where the land markets in the Border counties were quite challenged, a regional breakdown reveals that once again the Border region led the way in first half of the year, with average prices rising by 1.8%, to stand at €9,200 per acre. This was particularly driven by increased demand from both tillage and dairy farmers. The South-East and the Mid-West regions followed, with price inflation of 1.1% and 1% recorded, respectively. However, the South-East land values remain 1.4% lower at the end of June on an annual basis, while positively, the Mid-West farmland values were 1.9% higher year on year.
Such encouraging signs were not witnessed everywhere. The South-West region, in particular, has seen notable fluctuating price trends over the past three years. Following two years of price inflation in 2014 and 2015, land values stooped significantly in 2016, by 6.3%. The average price per acre in the South-West has therefore lost any ground gained during this time, stooping a further 1% in the six months to June 2017, now averages €9,900 per acre, bringing the annual decline to 3.7%.
Milk prices are up year on year and dairy farmers have extra money to spend this year, with that you could see a lift in the price of leased land and the possibility that they may invest in further land purchases towards the end of the year. Farmers that have a dairy farm neighbouring may expect an approach to lease further land from them and thus lead to a higher lease land price.
Many farmers are cautious about purchasing further land this year due to Brexit and the uncertainty. They are also concerned of the long-term view and the reform of CAP in 2020.