A lot of water has gone under the bridge this spring. The war in Ukraine, surging inflation and interest rate rises have all created uncertainty and had the potential to extinguish the flames in the property market.
Given this recent set of events, it is remarkable that the market has continued to boom during the spring. The main reason was the lack of supply and pent-up demand.
During March and April there were relatively few properties launched, indeed any noticeable increase has only been seen in May.
Buyer demand has remained stable, although I believe we are starting to see the cracks appear in the housing market.
Rural property has had a bull run for nearly two years – rarely does a run last longer than this, even without the macro pressures mentioned above.
A sure sign of a quietening market will be a run to quality. There are still strong buyers who want to purchase property, but they are now more focused on best in class.
They are prepared to wait and pay handsomely for these properties, however properties with blights will be the first to become affected.
I am not expecting a property crash. I believe the headlines in the papers predicting up to 20% fall in house prices are grossly exaggerated.
We can expect the strength in the market to run off for another month or so but I expect the market to be much more finely balanced come the autumn.
As this happens, pricing is going to become more difficult. Some selling agents have been guilty of overpromising to win an instruction.
They have relied on the strength of competition to get them out of jail.
If they adopt this tactic when the market changes, we will quickly find more properties sticking.
As ever, the buyer’s view on price softens faster than the seller’s, so we can expect a period of time before they realign, which will cause stagnation.
Demand for estates and land continues
The estates market is a microcosm of the wider property market.
It has very few buyers and sellers, the majority of whom are significantly wealthy people who will be well insulated from what is going on in the wider world.
They are discretionary purchasers. They buy properties because they want to, not because they need to.
It is also true that farmland prices have historically been strong in times of economic turmoil. In 2008, land prices rose as other markets fell.
Many investors like tangible assets in times of uncertainty.
Recent sales show a similar picture. This year we have seen some land transact at £11,000-plus/acre, whereas in 2021, £10,000/acre was more common.
This has been a surprise to many given the uncertain outlook for farming.
The trend of more farms and estates being sold privately has continued during the year. More and more buyers and sellers are choosing this method of sale.
Privacy, control of the sale and increased flexibility are the most common reasons for a seller to market their property privately.
Private sales also achieve excellent results, with holdings often selling for a premium.
Properties CKD is marketing privately include a Scottish sporting and agricultural estate, a Hampshire farm with excellent livestock buildings, and a block of commercial farmland in the Cotswolds, on which there is a sale agreed.
These follow a Hampshire lifestyle farm that sold after multiple attractive bids and a Welsh upland estate that has been bought by an investor.
A lot of buyers I talk to say they think the “new normal” for selling farms is privately rather than on the open market. I am not sure it is quite there yet, but it is certainly a growing theme.
Crossroads for landowners
The war in Ukraine has created a pivotal moment for many farmers, forcing many to make a decision on their future.
For the 2022 harvest, prospects look handsome. Crops in the ground were planted with seed, fertiliser and fuel costs mainly at 2021 prices while the price of grain and oilseeds has rocketed.
Farmers should do well this year. Next year is more difficult.
The price of inputs has inflated hugely and there is uncertainty whether the crop prices will hold at levels that are commercially viable.
Assuming current future prices remain, there will be a margin, but the risk is increased.
This is forcing farmers into a position where they have to take a decision on their long-term future.
Do they cut and run while the price of land is strong, or do they take a long-term view, find the additional working capital required and gamble the crop prices will remain high?