The report, which was launched by Minister of State for Agriculture, Food and Marine, Tom Hayes T.D, shows that that land prices for up to 50 acres increased nationally in 2013 and average rents are up 5% in the first quarter of 2014. Minister Hayes said: “Food Harvest 2020 sets out ambitious targets for agriculture in Ireland and many producers’ expansion plans will no doubt include decisions about the purchase or rental of land and it is therefore timely that this report has been published.”
According to the report, the average national price for land up to 50 acres with entitlements and a residential holding per acre is approximately €10,721. In Dublin, it is €13,000. While in Leinster, it is €11,132, in Munster, it is €11,378 and in Connacht/Ulster it is €7,375.
The largest increase in land prices was seen in the Munster area, where the average selling price in 2013 increased by 14.3% for land up to 50 acres with a residential holding. In Leinster prices increased by 13.9% and in Connaught/Ulster they increased by 2%, compared to the previous year.
In contrast to the smaller land transactions (up to 50 acres), price movements were negative in the case of larger (over 100 acres) sales with entitlements and without a residential holding in 2013. The largest percentage drop occurred in the Connaught/Ulster region, where land prices declined by approximately 13% year on year.
Tracking land and rental prices
It should be noted that land is not homogeneous; one hectare is not identical to another and prices will vary according to a number of variables, including: the soil quality; climate; purpose for which the land can be used; its location; and, the supply and demand for that type of land. One of the key areas the Society is addressing is the need for more information and data across the land, property and construction markets and the report represents the first in an annual series in a new initiative between the SCSI and Teagasc and will track the evolution of land purchase and rental prices over time.
‘Food Harvest 2020’ sets out ambitious targets for agriculture in Ireland and many producers’ expansion plans will include decisions about the purchase or rental of land. While there are already good estimates of output and input prices and farmers’ incomes, one area where progress is vital is in respect of information on land sale and land rental prices in Ireland. The price paid to purchase or rent agricultural land will be affected by a whole range of economic (and non–economic) factors. Therefore, those contemplating the sale or the purchase of land or the renting of land need to possess a good understanding of the current state of the agricultural land market.
The report includes the respective expertise of both organisations to increase the range and quality of the data that is available on the agricultural land market in Ireland. Data has never been more important to the agricultural sector and will continue to be important in guiding decision making as we enter this important period of change. The ability to understand the challenges and opportunities farmers face depends on the capacity to produce and interpret a wide range of data relating to the agriculture sector.
Almost unanimously, across all regions, Chartered Surveyors expect an increase in the demand for agricultural land between 2014 and 2016. Over 80% of respondents surveyed predict an increase in the demand for land in the coming years. Undoubtedly, the predicted abolition of milk quotas has spurred this on. Land is also viewed as a more stable, secure investment in comparison to other property types.
Supply is an issue
However, the lack of supply remains an issue. The current level of land transfer for sale is minimal with just 0.5% of all land transacted annually. A lack of mobility can prevent younger generations of farmers from gaining access to productive assets, which could have an impact on meeting the Harvest 2020 targets. According to Teagasc, in order to meet the higher output targets of 50% increases in milk production, 2,500 new farms will be needed, which has implications for the land market. It is imperative that the issue of supply is addressed at a policy level. Access to finance is also another issue. Given the fact that the majority of purchasers of agricultural land are farmers, their ability to access finance remains constrained and is highly sensitive to wider economic factors and their purchasing power can often be impacted by fluctuations in commodity prices.
Incomes earned on average Irish dairy farms increased strongly in 2013, while incomes in all other sectors of Irish agriculture are estimated to have contracted in 2013, when compared with 2012.
For 2014, costs of production are forecast to decline relative to 2013 – with lower feed and fertiliser prices combining with some reduction in the volumes of these inputs used, overall costs of production are expected to contract relative to 2013. With lower costs of production on most farm types, incomes in 2014 are forecast to increase by 13%.
The SCSI/Teagasc Land Market Review & Outlook 2014 is available to download from the SCSI website www.scsi.ie. The Society would like to thank Trevor Donnellan and Kevin Hanrahan from Teagasc for their input and collaboration on the report. We would also like to thank Frank Harrington, who is undertaking research in this area in collaboration with the SCSI, for his contribution.
Submission on Agri-taxation Review
The SCSI Rural Practice Professional Group made a submission to the Department of Agriculture, Food and the Marine as part of the ‘Agri-taxation Review’ which was announced in Budget 2014. The focus of the SCSI submission was around improving land mobility and it contained a series of comments relating to income tax, capital gains tax, windfall tax, and priority areas that should be addressed as part of the Agri-Tax Review. As a result of the submission, SCSI representatives were invited to meet with representatives of the Department of Agriculture, Food and Marine, and Indecon Economic Consultants and presented the key issues.