In this article, Mike Brady, discusses valuing agricultural land and provides his top ten tips.
Agricultural land is difficult to value, due to the low volume of sales and the absence of a public register of sales in Ireland. An acre of land only comes for sale once every 400 years, so getting suitable comparisons can be difficult in many areas.
A farmer once justified a high valuation for land to me by saying “they aren’t making any more of it and you don’t have to paint it to maintain it”.
This may explain the low Return on Investment (ROI) or high values of Irish land by international standards, but it is no substitute for an experienced valuer of agricultural land.
Location of land is the number one parameter for land valuation. Good quality land near towns and cities, especially in an opulent area where few parcels come for sale, can lead to exceptionally high prices per acre.
- Land quality
Farmers always pay more for excellent quality agricultural land. This is often described as free draining, well fertilised red soil which produces the best crops in locations with long growing seasons.
Parcel size can have an effect on the price paid per acre. Smaller lots often attain higher prices due to more people being able to afford the property.
Traditionally farm buildings did not greatly influence the price of land. However, modern dairy units and equine yards cost hundreds of thousands even millions to construct, so increasingly this is having an upward influence on the price paid for land.
Due to the shortage of residential housing and high rents, a farmhouse will nowadays always command a value, even if it is alongside the farmyard and difficult to separate from the farm.
A farm with good road frontage and many access points will always command a higher price as it can be sub-divided and more than one purchaser can buy the property.
Zoning in county development plans can be negative or positive for a land valuation.
Poor water supply, distance from 3 phase electricity, poor road access and no broadband can be a red line for some purchasers.
- Natural Capital / Climate
The effect of environment, nature and climate change on a holding are increasingly important factors in land valuation. Farmers are required to have a minimum 4% of their farmland dedicated to ‘Space for Nature’ to qualify for EU payments.
- EU Entitlements
Finally, EU farm entitlements are often mistakenly assumed to be attached to land and often included in valuations in error. Entitlements are owned by the farmer or farming entity and should be valued in their own right separately from the land.
About the author:
Mike Brady is an agricultural consultant and managing director at Brady Group, The Lodge, Lee Road, Co Cork.
Note: This article first appeared in IPAV Magazine – The Property Professional Q3 2023
See more news on www.thatsfarming.com