The 2024 farmland market in England and Scotland was marked by shifting supply, sustained demand, a general election and policy changes. While the latter half of 2023 saw land values rise due to strong demand and limited supply, the early months of 2024 introduced some uncertainty, but overall average land prices rose marginally. This update explores the key trends and factors shaping the market, including changing buyer behaviours, tax reforms, and the evolving outlook for land values.
Supply and Demand
The farmland market experienced a substantial increase in supply during the early months of 2024, when compared with the same period in 2023, and all regions in England saw an increased supply, a stark contrast to the historically low levels of recent years. This surge was partly driven by strong market performance in Autumn 2023 and concerns over anticipated changes in government policies and capital tax treatment for farmland.
However, the economic outlook for farming remains uncertain. Volatile crop prices, rising costs, challenging climate conditions, and the removal of traditional farm support have created financial strain for many farmers. Although the Sustainable Farming Incentive (SFI) offers some relief, high interest rates and borrowing costs have limited the purchasing power of local farmers who typically rely on loans. The result being that the market is now almost entirely reliant on equity buyers with liquid reserves to acquire these investments.
This imbalance between supply and demand has resulted in several farms or blocks of farmland remaining unsold. In areas without strong institutional, private, or local investor interest, demand has proven insufficient to absorb the increased supply.
Off-market sales have also continued to be a favourable way to acquire land, offering confidentiality, transactional speed and, in many cases, premium prices for the seller. Intense competition for available land, especially in high-demand regions like the South East, East of England and certain localities within Scotland, has further reinforced values in these locations.
Buyers and Sellers
The buyer landscape is more diverse than ever. Traditional buyers, such as farmers and rollover investors remain active, but the market has also seen the continued rise of "green investors." These buyers seek land for renewable energy projects, biodiversity initiatives, carbon offsetting and for environmental societal gain (ESG).
Sellers include land and estate owners rationalising holdings to reinvest elsewhere and individuals retiring from farming with no succession, or those under financial pressures from an increase in interest rates and subsequent increases on borrowing. The challenging weather has also played a role for some to make the decision to sell up.
Land Values
Land values improved during the latter half of 2023, driven by strong demand and a limited supply of available land. However, 2024 was more challenging. As noted above higher interest rates has deterred investment from a number of buyers, fewer rollover purchasers were motivated to acquire land as the volume of development land sales have fallen and generally declining agricultural productivity have all reduced buyer demand. Regional variation appeared with some land continuing to command premium prices, particularly in areas with strong demand for alternative land uses, such as renewable energy projects or biodiversity initiatives. The price of arable land in the latter half of 2024 reached on average £10,000 per acre, below the 2023 record high and on average pastureland sold for in the region of £8,000 per acre.
At the same time, a significant number of farms and blocks of farmland have failed to sell at current valuations, suggesting that overall prices have softened. With buyers wary of the tax changes introduced in the Autumn Budget and the cost of borrowing remaining high, land values in some regions are under pressure.
Of particular note in Scotland has been the cooling of competition for afforestation ground and along with that, a cooling of values being achieved bringing agricultural buyers for the same land back into focus.
Outlook
We anticipate that the outlook for farmland values will remain fairly static. This is down to the budget announcements whereby Agricultural Property Relief has been replaced with 50% inheritance tax relief over £1 million of agricultural value and due to a slowdown in development land sales. We don’t anticipate values increasing until there is a downward shift in the base rate and pressure from alternative land uses picks up.
However, opportunities for alternative land use does continue to support values in certain areas. Farmland remains a resilient asset, particularly for strategic and environmental investments. While the market is expected to face short-term challenges and possible stagnation, its long-term appeal as a secure and versatile investment is likely to endure producing favourable growth in the medium and longer term.
