IPAV AGRICULTURE OVERVIEW SPRING/SUMMER 2016

Transcription

1 IPAV AGRICULTURE OVERVIEW SPRING/SUMMER 2016

2 IPAV IRISH LAND SALES Message from the CEO I m delighted to welcome you to the first of what is to be a regular farm report by IPAV. Like other sectors of the economy land values have been impacted by the financial crisis with the amount of land brought to market hitting a low of 41,300 acres in The recent 2015 Irish Farmers Journal Land Price Report shows the figure rose to 86,408 acres in 2014 before dropping by 13.6% to 74,629 in 2015, evidence perhaps of stabilisation in the market. That the economy is in recovery is beyond doubt at this point. Nonetheless, there are challenges both globally and also in budgeting at home, with increased expectations and demands arising from the improving situation. I hope you enjoy this issue and the availability of our members throughout every town in Ireland to help advise and assist land owners in the sale of their very valuable assets. Mr. Pat Davitt CEO HISTORICAL The Irish attitude to land ownership is legendary as brilliantly portrayed in the film The Field. It is part of our DNA. Property has always been one of the hottest topics in Ireland. Land is the fundamental resource that is required to build these structures. Land has played an even more important role for many centuries as it has provided the means for people to provide for themselves, whether that be by means of extraction from the earth in the provision of product or whether that be use of lands for keeping livestock. The agricultural industry has experienced huge change in this country over the last 100 years. In 1916 there were approximately 360,000 farms in Ireland. This figure has now dropped to 135,000. While there may not be as many people working the land as in the past, it plays every bit as important a role today as it did 100 years ago and as time passes it will be recognised for the vital resource that it is. Average farm sizes in Ireland have increased in size from 14 hectares (35 acres) in 1916 to 33 hectares (82 acres) today. The figure has increased by approximately 5% over the last 15 years. In an average year only % of farmland changes hands in this country, an unusually low figure. The statistic will insure a continued demand in the medium to long term. 80% of land is in permanent pasture with a further 10% each in forestry and tillage. The Irish land market has been on an incredible journey and has experienced radical change over the last 15 years. Consistent with other property assets, the Irish land market experienced an unprecedented period of growth in the early part of this century leading to soaring average lands values increasing from 5,000 per acre in 2000 to 25,000 per acre in 2006 when prices peaked. In 2007 prices began to fall in line with economic trends and the onset of the recession. Average values fell over the following 4 years by approximately 57% across the board. Due to huge falls in value it took some time for many landowners to adapt to this new environment. Since 2009 the market has been in a period of flux while retaining strong demand as it has tried to find the true value of land in this new world. Taking all of the respected annual reports on board land values have over the last 5 years experienced some fluctuations. However, they now find themselves back at a level similar to the average figure of 2009 which was 9,000 per acre.

3 2015/2016 The Institute of Professional Auctioneers and Valuers (IPAV), the largest dedicated auctioneering body in Ireland has over 1,000 members spread throughout the country. Overall, in 2015/2016 prices on average have ranged from 5,000-10,000 per acre. Taking on overview of agents experiences, an interesting observation is that prices and values in most cases are less location specific and more to do with quality of lands and size of plot. Purchasers are taking a more commercial view of land and its ability to deliver income. As is common, smaller plots will generally secure a higher price per acre and there will tend to be more potential interested parties. The average size of a holding can vary greatly around the country with smaller parcels in the midlands and western regions due to the topography of the lands. A recent development observed by some IPAV members is the concept of migration as young farmers look at moving to other parts of the country where they can buy lands for less thus leaving them with some capital to get up and running. They are purely assessing the economic viability of the land in question. Other trends include farmers buying land primarily as an investment as the only other options are placing the money on deposit or holding it as cash with little or no return from both. An investor can secure a return of 2.5-3% on their lands by renting with an expected uplift in capital values likely. The clear view coming from members at this time is with the softening of prices of up to 10% over the last 12 months that now is a very good time to buy. The general consensus from the IPAV members throughout the country was that overall 2015 was a positive year. However, the market still remains quite volatile was a year of change for many farmers with the abolition of milk quotas and additional pressure from commodity prices. This uncertainty continues. Despite the uncertainty demand remained strong throughout the country for quality lands. Many agents are reporting a softening of the market in This is borne through by the recent Farmers Journal Annual Land Report which highlights an average decrease in land prices of 9.9% over the last 12 months. Why the decrease? The general consensus is that the main reasons for the fall is due firstly to low commodity prices. Both milk and grain prices are currently struggling. While not under as much pressure, cattle prices are also low. Many farmers, whether they be traditional dairy farmers or new entrants to the sector, invested heavily in plant and machinery in advance of the end of the milk quotas only for prices to fall 40% to the current levels of approximately 24 cent per litre. One agent pointed out that one of his clients has a dairy herd with a capacity of 100,000 litres. He has to achieve 27 cent per litre before he makes a profit. It is expected that these price levels will remain until mid 2017 at the earliest. The second difficulty being experienced by farmers is access to finance. Many IPAV members are reporting that contrary to claims, finance in many cases is just not available. This is a feature that is being seen across all aspects of the property sector. Thirdly, in particular parts of the country including the midlands, south and south west of the country, flooding has had a significant impact over the last 6 months. The knock on effect of this is the lack of return the farmer can achieve from these lands over the next two to three years. Let s take a snapshot of some of the comments from IPAV land experts on the ground in different regions around the country and their experiences over the last 12 months including the current trends and dynamics that exist in the agricultural world.

4 MUNSTER John Hodnett, Hodnett Forde, Clonakilty, West Cork. There has been a softening in prices over the last 6 months. The causes of this have been milk/grain prices, access to finance and flooding issues which still remain a significant problem well into Tom Crosse, GVM, Limerick. Having sold 1370 acres at an average price of 8,550 per acre in 2015, Tom believes many farmers invested in plant and machinery in anticipation of the exit of the milk quotas only for prices to fall 40% and as a result many are now under pressure. He also believes that the gap in the values is widening between top quality land and poor land Dermot Power, SF Power & Walsh, Clonmel, Co. Tipperary. The general market in Tipperary is very strong and values tend to be higher than most parts of the country. This is due to the thriving bloodstock sector in the county which is home to the Coolmore enterprise. Values for good quality agricultural land suitable for bloodstock, dry stock and tillage can make up to 15,000 per acre especially if it is a smaller holding. A number of recent sales in the Clonmel area in the spring months have achieved 13,500 per acre. David Considine, Pat Considine Auctioneers, Kilrush. Co. Clare. According to David, average prices in County Clare range from 5,000 to 8,000 per acre. An interesting comment from David is that farmers looking at marginal lands are finding it difficult to compete with investors in forestry which has seen an increase in value from 3,000 per acre up 4,500 per acre. CONNAUGHT Gerry Coffey, Gerry Coffey Auctioneer, Williamstown, Co. Galway. According to Gerry, he has seen good demand for parcels of land up to the 200,000 bracket. Anything above this is proving more challenging as securing finance is an issue. In recent months he achieved just in excess of 1 million for 151 acres which he believes is a good yardstick for land values in the area. John Earley, Property Partners Earley, Roscommon. Having sold 40 farms of varying sizes over the last 12 months, John confirms that the average price of an acre of farmland in the county is 7,000 with up to 10,000 being achieved for small plots up to 15 acres. He is also witnessing better quality lands formerly in permanent pasture being secured by forestry investors thus insuring higher yields. Colm Farrell, Colm Farrell Auctioneers, Gort, Co. Galway. Colm points out that average farm size in his general area is quite small: acres. Previously lands had attracted hobby farmers coming out from Galway city. However in today s market all interest comes from farmers primarily from the general area. Patrick Fox, Gallagher Fox, Ballina, Co. Mayo. The market has slowed up in the general Mayo region over the last 6 months. The strongest demand is for lands located in the south of the county with average prices from 7,000-9,000 per acre.

5 ULSTER Keith Anderson, Anderson Auctioneers, Donegal. Donegal is a county of two halves with by far the biggest demand in the south of the county. As a result, average values can range between 5,000-10,000 per acre. There tends to be good interest from Northern Ireland also for farmland. Peter Murtagh, Murtagh Auctioneers, Cavan. Average values in Cavan range from 5,000-8,000 per acre. Peter has also noticed some farmlands being transferred to forestry. He also notes that as a result of falling milk prices, some dairy farmers are now looking at the overall viability of staying in the dairy sector. LEINSTER Ron Duff, DNG Ron Duff, Ratoath, Co. Meath. There can be a significant variation in prices in County Meath due to its proximity to the capital. In the north of the county prices would be in the region of 7,000 per acre depending on land quality extending to 10,000-12,000 per acre in the south of the county. He has experienced an overall fall in prices primarily due to the poor commodity prices currently being experienced. Alan Bracken, SF Davit & Davit, Mullingar, Co. Westmeath. Alan is finding that good quality parcels are selling, with interest also coming from investors. He has noticed recently that some farmers are looking to migrate from other parts of the country once they are happy with the quality and price of the lands in question. It is a purely economic decision. Michael O Leary, Sherry Fitzgerald Kinsella, Gorey, Co. Wexford. Michael notices a 65% variation in prices in Co. Wexford depending on the location in the county. The closer to Dublin, the more expensive it gets. He has also seen a fall in prices and believes that access to finance is a significant deterrent for buyers. According to the reliable Farmers Journal Annual Land Value Report which was released in March 2016, overall average lands values experienced a fall of 9.9% in 2015 bringing them back from 9,900 to a level of 8,919 per acre. According to Sherry Fitzgerald Land Market Review for 2015, price performance in the Irish Agricultural sector in 2015 was moderate following steady price growth in On top of this a common conclusion from all experts in the industry is that the supply of land available to purchase has reduced further, not dissimilar to that of other sectors of the property market. This continued lack of supply will continue to insure there will be a sustained demand for land for the foreseeable future

6 OUTLOOK 2016/2017 There are many external factors which can affect the price of land; these are completely outside our control here in Ireland. What is abundantly clear is that demand for agricultural produce is increasing year on year as the world population continues to increase while land remains a limited resource. Taking a consensus of opinions from IPAV members nationally the two primary issues of concern within the farming sector which will continue to determine land values in 2016 and 2017 are the price of commodities, primarily milk and grain, and the ability of farmers to access to finance for both land purchase and capital expenditure. Commodity prices continue to play a significant role. It is rare that three important sectors of the industry - dairying, beef and grain would be experiencing such international price pressure as is currently the case. Yes, this is likely to be part of a cycle, but when will it change? Milk prices are down up to 40% since the abolishment of quotas. Many younger farmers invested heavily in plant and machinery in anticipation of the opening up of the sector. Whilst a fall in international demand from evolving markets like China has fuelled much of this pressure, it is likely that circumstances will change and prices will increase in time. Whether farmers can sustain this is debatable. The only prices which are holding up reasonable well are for sheep. Many IPAV members have been in practice in their locality for generations and have been involved in many of the land sales which have taken place at a local level. Your local IPAV member is ideally placed to assist you with an up to date professional valuation of your lands and subsequent sale assisted by his/her knowledge of the agricultural property market locally. Why not contact your local IPAV member to find out the true value of your lands in today s fast changing environment? IPAV 129 Lower Baggot Street, Dublin 2 T: F: info@ipav.ie