According to a new survey, selling agents predict that land prices will rise by 4% on average in Ireland this year.
SCSI auctioneers and valuers say land prices remained resilient in 2020 despite the threat posed by Covid-19.
In the survey, auctioneers, valuers, and chartered surveyors operating in the agricultural and rental markets revealed that restrictions on viewings due to lockdown led to a decrease in sales volume, as prospective sellers opted to defer their plans to sell.
According to the Society of Chartered Surveyors Ireland / Teagasc Agricultural Land Market Review and Outlook Report 2021, demand for rented ground also remains strong. They expect rent to rise by 8% in Leinster, 5% in Munster and 6% in Connacht.
Land prices in Ireland
Nationally, the price for non-residential land ranged from an average of €5,900 per acre for poor quality land to €9,381 for good quality.
A new feature in this year’s annual survey is a county-by-county breakdown on prices of good and poor-quality land.
The report finds that Leinster had the highest prices in 2020 because of the higher quality of land and high demand.
For good land, less than 50-acres, average prices in the province ranged from a high of €13,600 in Kildare – the highest in the country – to €7,900 in Longford.
Meanwhile, the prices for inferior quality ranged from a high of €8,300 per acre in Kildare to €5,500, again in Longford.
In Munster, where “dairy farmers are driving the market”, prices ranged from an average of €11,900/acre in Tipperary to €9,000 in Clare. Besides, prices for inferior quality ranged from an average of €6,500 in Waterford to €4,700 in Clare.
In Connacht/Ulster, prices for good land ranged from an average of €9,500 per acre in Donegal to €6,500 in Monaghan and for poor land from €5,750 in Monaghan to €3,250 in Leitrim, the lowest price in the country.
Who is driving the market?
James Lee, Chair of the SCSI’s Rural Agency Group, said that Covid-19 lockdowns led to a reduction in sales volume.
“The inability to view holdings or physical auctions led to a significant increase in the number of sellers postponing plans to sell land. In our survey, over a third of agents (35%) reported a decrease in the volume of land sold in 2020 compared with 19% in 2019.”
“Virtual viewing options have been available to sellers, but clearly many have a preference for more traditional auction sales.”
Agents in Leinster say younger farmers with a Green Certificate are helping to drive the market. However, they caution that land price expectations from some vendors are “simply unrealistic at this present time”.
In Munster, dairy farmers are the most active buyers and renters of land as they continue to strive to increase their farm size.
Furthermore, in Connacht/Ulster, average land quality is typically lower than other regions, tends to be available in smaller lots and is mainly for grass-based agriculture.
Strong resilience throughout Covid-19 pandemic
According to the report, while Covid has affected sales activity, it has not impacted output or prices. Therefore, farmer confidence about the future has been “unaffected”, Lee said.
“The land market has shown strong resilience throughout the pandemic, and agents believe prices will rise on average by 4% this year,” he added.
“In the rental market, while Connacht/Ulster reported a decrease in prices last year – by 13% for grazing land – prices are expected to rebound by 6% this year, a little behind Leinster on 8% but ahead of Munster on 5%.”
Agents say the low supply level is again an issue in the rental market, but it is not Covid-related.
“Here the issue is leases with 24% of agents reporting a decline in the volume of land leases in 2020 compared to just 8% in 2019 as more land is ‘locked up’ in long-term leases.”
Teagasc economist, Dr Jason Loughrey, said that while Covid may have impacted the volume of sales, it had little impact on agricultural commodity prices last year, and this helped to support farm incomes and land values at a time of great uncertainty.
“The closure of hotels and restaurants and the contraction in the tourist business led to a sharp fall in sales of food and drink through these channels. However, this was largely offset by increased food and drink consumption within the home.”
“Overall, it is estimated that the average farm income in Ireland increased by 6% in 2020 and this year, we forecast an increase of a further 3%,” he added.
“Looking at the various farm sectors, last year was a good one for sheep farmers in particular, as they benefitted from higher prices as did pig producers.”
“Dairy farm incomes were stable while incomes on cattle rearing farms increased. There was no change on other cattle farms. Tillage farmers did have a disappointing year due to adverse weather conditions which led to low yields and a drop in income.”
2021 expectations outlined by Dr Loughrey:
- Input costs: feed, fertiliser, and fuel prices all on the increase.
- Lamb prices are expected to be significantly higher in 2021 relative to 2020;
- Slight improvement in cattle farm income expected;
- Dairy incomes to remain “stable”;
- The outlook for tillage farm income this year is “contingent” on cereal yield developments.
Meanwhile, in February 2021, Teagasc published a new report indicating that the average family farm income in Ireland may increase by 3% in 2021.