Agricultural and amenity land market - what's happening?

Most of the large farm and land agents along with professional bodies, such as the RICS, and banks have announced their review of the second quarter land sales and price indices. Much of this is consistent with minor variations depending on the particular thrust of the organisation - some talk the market up and others are a little more realistic. What is quite clear is the demand for land remains firm and averages between £5,000 and £6,000 per acre for bare agricultural land in the south west depending on use - pasture or arable - and quality (Grade 1, 2 or 3). We can all speculate what is driving the market - tax planning, low risk, food shortages, subsidies, scarcity.- any number of theories. I find, quite often, that clients are buying just because they like owning some land.

What I have learnt, with some recent acquisitions and valuations for clients, is that quality of land seems to bear no relation to price. It all depends on demand in the "micro area" in which the land lies. For example, a block of bare land in Devon was recently sold in two lots - one permanent pasture and the other arable, both level with good road frontage. In normal circumstances you would anticipate the arable to reach a higher value due to it's versatility. Quite the reverse happened with the pasture achieving £600 per acre more. This was unusual due to the size of the lots. We all know that pony paddocks and amenity land frequently command a premium over agricultural value even when the quality is not there but that is a separate issue and small enclosures are hard to come by.

When buying land, we are all guided by averages and recent sales but local knowledge is always essential when knowing how much to pay. There is plenty of evidence to make you think otherwise.

What's happening in the country property market?

Good news for the buyer. There is plenty of property across the whole spectrum - cottages, farmhouses with land and top end property both on and off market. Some of these properties are not finding buyers at the asking price. Everything you see and read in the papers in this past week would not necessarily be true of the areas I cover - Dorset, Devon, Somerset and south Wiltshire. It has been said that there is more and more property coming onto the market which in turn is driving prices down. This is not entirely the case but there are signs of a slow down in buyer enquiries and activity. I know this as I spend a lot of time talking with agents, solicitors and banks both in a professional capacity and as a property search agent. I'm also actively trying to find and buy property for clients. The message coming through loud and clear is that many deals are falling through for two main reasons. First, people feel prices are going to fall and pull out and second, people can't raise the debt. In the first case I would not recommend pulling out of the purchase of your dream home. You might be able to renegotiate downwards or get it for less at a later date but you might lose it all together and, as many do, kick yourself when 6 months or further down the line you still have found nothing. Recently I heard of an agreed sale where prior to exchange the purchaser dropped the offer by £200,000 for no good reason. The consequence of this action was the vendor rightly declined the revised offer and further has refused to talk any further.

I also know that due to the slow down and possible fall in prices agents are strongly recommending sellers look at taking offers. Prior to this I witnessed many price reductions taking place.

What I am trying to say is now is a very good time to get out there and start looking for that property and buy it.

What's the property market doing?

I get asked this every day and in recent times it's been hard to give a clear reply. I know that there is strong demand for family rental property near the independent schools of north Dorset and the surrounding areas often because they are unable to find a suitable house to buy. Demand for all land is strong whether amenity or agricultural with prices holding firm and a number of off market deals taking place. On the other hand, discussions with some local agents suggest price reductions and little buyer interest in what is available - I have seen one Somerset Rectory go under offer three times only to fall through in as many months. I also negotiated a 12% reduction off an asking price just recently with little trouble.

We have had the budget which wasn't so bad, we're out of the world cup, Wimbledon is over and reports suggest the chances of a double dip recession are 60% - 80%. Some may think, with the current economic uncertainty and lack of available credit facilities that the property market will struggle to build on it's recent momentum -this may be true in many areas and the lower end of the market. What I know is that the demand is still there in the areas in which I operate and I have to move pretty fast if I see the property a client wants.

Guide prices aren't always what they seem.

When looking around for a house to buy, it's only natural to assume that the guide price is an indication of true value or thereabouts. Not so, these are often set against an Estate Agent's advice and can often be brought about by debts, ambition or a chancer who wants to see if someone will pay a premium to the market with no real intention of selling. When assessing the market value of a property and carrying out research into local values or the specific history of a property, one often finds that properties are for sale at up to 30% more than their true value and on the odd occasion some are undervalued.

Buying a house is not easy, as the mixture of emotional want, need and sometimes desperation can distort objective decisions. You feel that if you save £10,000 or more you have done well but it can be a lot more. It's knowing the local market and values that really helps make the right decision and it often pays to get some assistance and advice.

Hidden gems - are off market sales a myth?

Buying agents often sell themselves on having the inside track on property coming to the market and that they have access to a property prior to an agent marketing it. Well that's true and largely because of long term relationships and frequent contact built up with Estate Agents that members of the buying public do not share. One client recently said they had come to me for two reasons. The first that it was just not possible to keep travelling such a distance to be disappointed by what they saw and second, they found that due to a shortage of quality country houses and second homes most had been sold prior to marketing. Unfortunately, this is all true. The good stuff has always gone first.

So what of the off market theory. Well, it happens a lot in my area. You get on the information highway and property keeps cropping up. I now have to keep a written record of what's available, when and where in order to keep up with it. We can be talking of situations where plans have been made to sell but the date is set 18 - 24 months down the line. A sale can still take place with a deferred completion if it's the perfect home for the buyer. I keep repeating myself, but here in Dorset and the surrounding counties - if you see the perfect property, buy it. It could be years before you see something similar again.

Land and marriage values.

These days most people in the countryside crave a small piece of extra land especially if they have none or only a little. Many want more than a little. Demand can be high and competitive if it is near villages and towns.

Before buying, you should carefully consider it's use under your ownership as land does not take care of itself whether woodland, amenity, arable or pasture. It requires some level of management to keep it in good health. Also the tax implications need consideration which is another subject in itself although many will be aware of the tax advantages of agricultural land and inheritance tax.

Acquiring land near or adjacent to your property is not always easy - it can take time, a lot of patience and sensitive negotiations.

The value of land has risen considerably in the recent past, whatever the type and quality. In effect, it has caught up with property and the buyer profile has changed whether for amenity, equestrian or agricultural use. The knock on effect has been that valuing land is not straightforward whether "bare" or "enhanced" in appearance. One factor that will form part of the equation is "marriage value". By this I mean, does it add value to your property regardless of the vendor's use for it? A rule of thumb is the smaller the parcel, whether for a tennis court or orchard, the more expensive the price per acre. There is no science to this and it boils down to whether it is worth the vendor's time and trouble against the price offered. Do not assume that because it is currently in agricultural use or part of a farm that you will pay agricultural prices.

Let's say agricultural land is worth on average £5,000 per acre - buying a small piece of this land could end up costing anywhere from £10,000 to £150,000 per acre pro rata. I can site numerous examples where a paddock or field has sold for prices in this range. However, it is not only the price but the negotiations that can be testing. I recently bought some woodland for a client which he had been after for 5 years. It required a high level of patience and helped to involve a third party. It may sound strange but people would far rather have an agent involved as a go between than risk a falling out with neighbours or clash of personalities.

I believe there is nothing like a direct approach in these situations. Too often I know of people who have lost out on land and indeed property because they were working on a strategy or thought they were the only person with an interest.

So be bold but do not be surprised at what some vendors ask for a small piece of land. Remember, for some, it makes no difference whether they sell or not but the value to your property aside from personal enjoyment can be be in the region of 10% - 20%. You should bear this in mind when you make the initial offer.

House buying and the property market.

People and clients often try and predict the market. If we all knew the answer then we would not be so prone to such indecision when it comes to buying property and our advice would be much in demand. Now and in the past, many nervous clients have asked "should we buy now or wait?" or "I read in the paper prices are due to fall" and so on. Whatever you think, you can nearly always find commentary to back that particular view. My advice is simple, if you are looking for the perfect country house or cottage, don't lose it by trying to predict the market. Prime property in good locations in the south west will always sell and if you find that dream home, having searched for a year or more - buy it. It could be several years before you find another, just get some good professional advice and press on. I recently found and acquired an outstanding country house privately for clients and yet they still were concerned about whether it was the right time to buy, what about the election, were they paying too much, etc. They had been looking since before the last election and had found nothing as good as this. I can add they bought it well and I could sell this particular house all day, every day. It had been with the previous owners for over 30 years and was a real gem and just what many wanted - 6 bedroom period house, formal gardens, river frontage, land, stables, outbuildings and outstanding views and location. When you find the right property do not hesitate or worry too much about predicting the market - go for it! You'll never regret it.