Colin Muller, Chief Executive, Muller Property
In this article, Colin offers to farmers and landowners his view on how Brexit will affect UK agricultural land values generally and on how it might affect the value of agricultural land for housing development.
There has been a lot of media speculation about the effect of Brexit on agricultural land prices. Several reputable surveys suggest a substantial fall in value post Brexit one or two other experts suggest otherwise.
Firstly its important to set things in context.
Since we joined the European Union (European Community) in 1972, British farmers have had EU subsidies (which the UK is a net contributor to ). The effect of farm subsidies on land prices in the UK over time has been to help many farmers’ incomes with a positive impact on land prices.
After Brexit, farm payments will be phased out and a new agricultural subsidy will be introduced. We are not sure yet exactly what the new system will involve.
In the Agriculture Bill, the Government have suggested that the direct payment scheme under the Common Agricultural Policy (CAP) based on the amount of land owned will be replaced by payments linked to environmental standards and stewardship of the land.
The current proposal is that direct payments will be reduced from 2021 and continue until they are totally eradicated in 2027. Annual payments of up to £30,000 will be cut by 5 per cent in the first year of the transition, while payments of £150,000 or more will fall by 25 per cent.
There is a proposal to allow a lump sum of ‘delinked’ payments for those ceasing to farm to help diversification. The Institute of Chartered Accountants has an excellent in-depth analysis of the Bill HERE ( link to https://www.icaew.com/technical/farming-and-rural-business/general/agriculture-bill-2018-and-financial-impact-of-bps-removal )
There was a similar situation in New Zealand in the 1980s, farm income subsidies were removed entirely in 1985. Land prices were impacted and farm incomes dropped. Over a 10 year period productivity (and therefore farm incomes) improved and Land values reversed all their losses.
Like all things Brexit so much is shrouded in uncertainty and yet to be defined. The current proposals may yet be changed, and, as I write today (1st October) Brexit may be delayed or even not happen!
Some surveys in my profession suggest a significant fall in land values after we leave the EU, however in my view the picture will be a mixed one. If we are simply talking land values then good quality land in the right location will still sell well. I suspect that the gradual withdrawal of direct payments will cushion the effect on land prices too.
However, if we are looking at securing planning permission on land for housing then typically that attracts a multiple of 20, 30, 40 or even 50 times agricultural value. Additionally the new proposal to allow a lump sum of ‘delinked’ payments for those ceasing to farm to help diversification has the potential to boost values even further on ‘edge of settlement’ land.
In such uncertain times, getting your land looked at and assessed is absolutely essential. Muller offers a 24-hour turnaround for any land assessment anywhere in the UK.
We are experts with a strong and established track record and we are used to proactively dealing with the planning system and take a hands-on, no-nonsense approach to dealing with Councils up and down the country. We understand the challenges, the timescales involved and are known for getting the job done.
What’s more, Muller takes on all the costs and the risks, and we have the track record of getting planning permission for farmers and landowners and realising many millions in enhanced land value. As the process is not cheap one of the advantages of using us to promote your Land is that we can fully expense these costs for you.
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