In 2024 we continue to see people carefully assessing their options when considering a sale or purchase of farms and agricultural land. We caught up with one of our partners, Matthew Allen, who heads up our National Country Agency Team (NCAT), to find out his views on the outlook for the rest of 2024.
We have had a fairly slow start to 2024 with regard to open market sales and one of the key factors has been the exceptionally wet start to the year with many crops struggling to get established or being completely underwater This added to potential taxation reforms, increased interest rates, high input costs, reduced Basic Payment Scheme (BPS) payments, and a general election looming leading to buyers taking a more cautious approach to the marketplace, a trend we have seen carry into 2024.
The buyer profile across the farmland marketplace remains diverse, as more environmental, conservation and non-agricultural investors seek land for use within the emerging ‘natural capital economy’. Sustainability and the protection of our natural resources are now a key component of many discussions with prospective purchasers. Interest from renewable energy investors has strengthened further.
2023 saw an increase in the supply of agricultural land by about 15% but with significant regional variations but we have seen continued strong demand for well-located and sensibly guided land. For the right agricultural property, there is still good demand but the prices being achieved were a little more conservative.
Many private and investor buyers expected further supply increases throughout 2023 and perhaps held back a bit during the year to consider their options. They were also particularly conscious of increased borrowing costs and continued high input costs. Strategic land buyers remain active and there were certainly fewer farmer buyers in 2023 and from Q3 onwards we certainly saw much more caution from them around large investments with high borrowing costs with more stringent serviceability-led criteria from the banks.
2023 saw further retirement sales for those without succession options as they look to retire a little earlier than perhaps planned as the BPS falls away completely and with continued uncertainty about the financial benefit of environmentally led future schemes. A very average harvest last year without much surplus cash led to a significant number of discussions with potential sellers looking closely at their options and business direction for 2024 and beyond.
In the medium term, the prospect of a poor 2024 harvest may prompt further sellers to enter the market. Although there is more clarity about what the Sustainable Farming Incentive (SFI) opportunities are there may be some medium-term commitments for those landowners looking to potentially sell in the next couple of years who may not choose to go down that route for fairly modest potential returns
As the Spring progresses and the weather hopefully improves, we will see more estates and blocks of land coming to the market as they look to try and transact before the General Election which is likely to be later in the year. There will still be good demand for the very best in class but perhaps more uncertainty about more marginal property and medium sized blocks of land.
It will be another interesting year for the land market that’s for sure!
