Does agricultural land hold its value?
The global population is predicted to reach 9 billion in 2040, with some estimates claiming it could even top 10 billion by 2050. With an increasing strain on our natural land and resources, this will mean the demand for agricultural products will only continue to grow.
Moving away from marginal land and into renewable energy production and sustainable agricultural practices is the only way many scientists can see the population surviving. This means that now, agricultural land for wind farms, biomass crops, and solar farms have driven up the values on lower quality land grades.
In this article, we will cover how agricultural land holds its value, how much it is worth, the ins and outs of planning permission on agricultural land, land valuation, and influencing factors.
How much is agricultural land worth?
Agricultural land values vary considerably, but over the last century agricultural land in England has returned 6% per annum – a compound annual growth rate of just over one per cent.
As we move into 2022, farmland values are plateauing temporarily. This is due to the political uncertainty post-Brexit and post-CAP reforms.
In 2019, there was a record low agricultural land supply which resulted in this flat value, seconded by the late post-EU farm subsidy scheme for Welsh farmers which was promised to be maintained but has not been scheduled until 2025.
Then, as the global COVID-19 pandemic exacerbated policy and trade uncertainty, value rise was halted again. However, leading into 2021, the Agriculture Act was passed and Brexit negotiations concluded with a trade deal between the UK and the EU.
How to value my land
Land valuation is totalled from the price of land, considering potential improvements. This is done through examinations and surveys which also contemplate surrounding areas (green space, area income, etc).
The results of a valuation will suggest the best uses for the land and calculate a value by the Highest and Best Use method, alongside the sales comparison method (comparing recently sold local properties similar to your property) to produce a comprehensive report.
What affects how much agricultural land is worth?
Versatility is one of the most important factors, determining the range of crops and stock the land can carry sustainably. Productive and accessible land with an established water supply will always generate interest.
Subsidies are also of interest in potential sales. Now that the post-EU Environmental Land Management scheme is being rolled out, agricultural land will become profitable in the short term again.
However, this will only be in full effect by 2025, following the next UK general election. A changing government often means a drop in land purchase and value, as investors avoid the potential for loss of inheritance tax treatment and rollover relief on capital gains tax.
Does agricultural land hold its value?
Due to the tax benefits covering owners of agricultural land, often it can be said that it does hold its value and represents one of the most stable forms of investment.
Inheritance tax relief is usually charged at 40% on estate values above £325,000. However, agricultural land qualifies for a total relief on the land after two years of ownership, provided that it is farmed by hand.
For non-farmer owners with no desire to farm the land themselves, entering into rental agreements with farmer tenants is the way forward. By sharing resources and ensuring sustainable land use, agricultural land can hold its value for decades.
Selling land with planning permission
As the population increases, there is also a growing demand for housing. As a result, swathes of agricultural land is being bought up from small farmers by property developers.
It should be noted that gaining planning permission on your land will increase its value, although the process of gaining planning permission is often a very time consuming and expensive one, which also saddles you with all the financial risks involved.
If you'd like to know more about how much agricultural land is worth or if you have some land you're looking to sell, get in touch with us today for a free, no-obligation consultation.