The market for farmland this year has seen a change in the type of buyer, leading to demand outstripping supply.

John Coleman, head of land and farms sales at GSC Grays, says the market for farmland in 2023 has seen a drop of nearly ten per cent in farmer buyers but private investors, lifestyle buyers, institutional investors, and a new type of environmental buyers are becoming increasingly active.

As a result, the market overall shows demand continuing to outstrip supply with the proportion selling for economic reasons increasing significantly.

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John Coleman said: “In the buyer market in any one year, we would expect the number of active farmer buyers to be at or just over 50 per cent but in 2023 this is falling closer to 40 per cent. The lack of farmer buyers has been compensated by private investors, lifestyle buyers, institutional investors, and environmental buyers.

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“The last two groups prefer larger farms or land holdings as their need for ‘green credentials’ is hard to fill in smaller lumps. ESG investment funds have been hugely influential recently and capital funding for environmental groups has made them very competitive with the need for Biodiversity Net Gain (BNG) and in Nutrient Neutrality (NN) where the better the land taken out of agricultural production the greater the reward and benefit to the environment.

“How long these conditions can continue is open to debate, as the government are threatening the removal of Nutrient Neutrality (NN) to assist housebuilders.

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“The lifestyle buyer and private investor face change as their competitive advantage over farmers comes from capital tax reliefs through Agricultural & Business Property Relief (APR & BPR) which a new government may affect.”

While there is a perception that the supply of farmland has seen a significant increase, John Coleman says analysis of the market, particularly across the North of England, suggests otherwise.

He said: “Various reports say anywhere from 33,000 to 62,000 acres of openly marketed land was on offer by the end of June 2023 – a little down on 2022 and at least ten per cent below the ten-year average. For land parcels and farms greater than 50 acres, the amount of land offered for sale in the north is around five per cent up on last year and similar to the ten-year average.

“Northumberland is offering more farms for sale than it has done for the last 12 years. However, North Yorkshire and County Durham have remained relatively quiet, down over six per cent this year, while Cumbria is even quieter. “

Despite the impact of interest rate rises, premium prices are being offered in the market with an increase in available land expected at the end of this year and heading into 2024. “Prime arable land has traded in the north between £10,000 and £13,000 per acre, while grassland prices have settled at between £8,000 and £9,000 per acre,” he explained.

“Marginal land and upland grazing have benefitted again by competition from the forestry sector with land capable of supporting commercial plantations trading between £4,500 and £6,000 per acre. Expectations are that there will be more land available in the second half of the year and going forward into 2024.

“However, buyers are likely to face increased funding costs and the possibility of a change of government in 2024 may cause them to offer less or postpone any decisions.”