Land Report: 2020 - a good year for selling land

The number of acres of farmland offered for sale in Ireland in 2020 fell by 25.4% and the average price rose by 15% to €10,316/ac.

That’s a short statement. But behind it was a year of disruption and challenge caused by COVID-19 and the multiple Iockdowns that were put in place to contain it.

It was a year of exceptional uncertainty for the sellers and buyers of farmland and for the auctioneers helping them.

Many farmers and auctioneers had to deal with illness and even deaths among family and work colleagues.

This report looks at the outcome of the year in terms of land offered and sold, prices paid and trends. We will look first at supply, then prices.

The standout characteristic of 2020 was the drop in the supply of farmland for sale, although supply has tended downwards over the past three years.

Auctioneers and land agents have reported that more and more land has gradually become tied up in leases of five, seven and more years, with the income tax incentive.

However, given there were no sudden changes to this scheme or to any other factors that can affect the land market, the very sharp decline of 2020 can be put down to the pandemic and particularly lockdowns.

The number of farms that were put up for sale in 2020 and included in the Irish Farmers Journal survey was 943. This compares with 1,331 farms offered in 2019. That was 388 fewer holdings, a drop of over 29%.

Munster saw the largest number of farms put on the market at 375, followed by Leinster with 306.

Connacht had 202 and the three ROI counties of Ulster had 60. While the overall numbers were down, that pattern was similar to recent years.

The total area of land put on the market in 2020 was 45,655ac. This was 15,551 fewer acres than in 2019, a drop of 25.4%.

Again, the largest total area of land put up for sale was in Munster at 18,950ac. This was followed by Leinster with 16,341ac.

In Connacht, landowners put 8,399ac up for sale, essentially half of that offered in Munster and Leinster.

In Ulster, the total was 1,965ac.

Slightly bigger farms were put on the market in 2020. Nationally, the average holding size offered was 48.4ac in 2020. It was 45.9ac the year before.

Among the provinces, average holding size offered was biggest in Leinster and smallest in Ulster.

It was 53.2ac in Leinster, followed by 50.5ac in Munster, 41.5ac in Connacht and 32.7ac in Ulster.

The standout characteristic of 2020 was the drop in the supply of farmland for sale

The survey breaks holdings down into various size categories and looks at the numbers offered for sale, for last year and the year before.

Last year, as in other recent years, well over half of the holdings put up for sale were under 40ac and about one-third were in the range of 40ac to 99ac. But the biggest drop in supply in 2020 was in the category of farms of over 200ac.

There were just 13 of these big farms put up for sale last year compared to 22 in 2019. This means that, nationally, supply of such farms fell by 41%.

Next most affected was supply of farms at the other end of the scale – under 40ac.

Supply was down by 33%. Some 563 such farms were put up for sale, compared to 835 in 2019.

Supply in the middle size categories was less affected. Some 296 farms of between 40ac and 99ac went on the market, a drop of 23% on 2019.

In the next category of 100ac to 200ac, some 71 farms went up for sale, also a drop of 23%.

Pandemic hits confidence

Auctioneers reported concern among some landowners that their holdings would not make full market value and that landowners preferred to postpone selling until the pandemic was over. These were landowners who could choose when to place their land on the market. That flexibility was not available, for example, in the case of executor sales.

Then there were the difficulties of planning and conducting sales when lockdowns were announced at relatively short notice. Most visibly affected were public auctions.

Agents who traditionally held auctions in their own showrooms or a nearby hotel found these usual arrangements suddenly forbidden.

But even conducting sales by private treaty became very difficult. Meetings with clients in auctioneers’ offices were halted during stricter stages of lockdown.

Viewing of farms and residences was halted.

Travel restrictions were imposed forbidding travel 5km from home or outside county borders.

Some older farmers were afraid of catching the virus and postponed selling or viewing land

Some auctioneers reported that these travel restrictions prevented some potential bidders from travelling to view farms. One said that some older farmers were afraid of catching the virus and postponed selling or viewing land.

Farmhouses of growing interest

Presence of a residence has long been an important selling point for any farm or block of land.

Demand for land with residences in 2021 will be watched with interest by auctioneers and landowners given reports of higher interest among city-based families in relocating to rural areas and once there working from home.

Last year, just over one-third (36.5%) of holdings put up for sale had a residence of some type. That was a small decrease on 2019, when the figure was 38.4%.

The proportion of land offered with a residence attached was highest in Munster and Leinster at 38.4% for both, and lowest in Connacht at 30.2%.

Auction versus private treaty

In recent years about two-thirds of farms put up for sale were offered by private treaty, with the other one-third going for public auction or tender. This pattern was thrown out the window in 2020, because of COVID-19 lockdowns.

Last year, 80% of the farms put on the market were offered by private treaty – 755 in all.

The number that went to auction was 168, which was just 17.8% of the total. That was a 56% reduction on the number offered by auction the year before.

Last year, 80% of the farms put on the market were offered by private treaty – 755 in all

Twenty farms were offered by tender, which was not that different from the 22 of 2019. That was 2.1% of all farms.

The number for private treaty includes some holdings which were originally planned for an auction but which had to be cancelled because of lockdowns and instead were offered by private treaty.

Of the 168 auctions of farmland held last year, 101 farms sold under the hammer. That was equivalent to 60% of the total. Sixty-seven farms were withdrawn – 40%.

Farms sold well

In recent years, about 54% of the land offered for sale was sold that year.

Last year, 59% of the land offered was sold by year-end. The figure is all the more interesting, given that fewer auctions were held and more of the land was offered for sale by private treaty.

Sales by auction tend to be quicker than sales by private treaty. In addition, where auctions had to be cancelled because of lockdowns and these properties switched instead to private treaty, in some cases this further slowed the sale process.

The area of land sold in 2020 was 27,124ac. That compares with 33,291ac in 2019, an 18.5% drop.

Switching from acres to farms, out of the 944 farms that were offered on the market, 533 were sold by year end. That was a drop of 31.9%. Just over 56% of the farms that were offered sold before year-end. The figure for the year before was over 58%.

When size is considered, 324 farms under 40ac sold by year-end while 210 farms of over 40ac sold.

Price jumps by €1,345/ac

Once the land market got going in the early summer of 2020, it became apparent that, whatever about supply, prices were holding up. Auctioneers were quick to notice the trend – and were relieved, too. They could reassure their farmer clients that they were selling into a good market.

And the market stayed firm right through the year. Average price in 2020 turned out to be €10,316/ac. This was a very significant increase, up by €1,345/ac or 15% on 2019, when the average was €8,971/ac.

It was all the more noteworthy given that land prices have been treading water for the past five years, not moving far above or below €9,000/ac. So it turned out that 2020 was a good year to sell land despite everything.

As would be expected, small farms made a higher average price per acre than big farms in 2020. But the premium for small farms reduced marginally in 2020. It was €560/ac compared to €601/ac the year before.

The average price for farms under 40ac was €10,400/ac. The average for farms over 40ac was €10,188/ac.

When price is weighted for farm size, the weighted average price in 2020 was €10,296/ac. This was an increase of 11% on the weighted average of the year before.

Last year was also different in that it broke a recent pattern whereby when land supply fell so too did prices.

The reason for that link was probably that when landowners saw good prices they would put their land up for sale. When prices looked weak they held off. Last year, pandemic uncertainty overrode all else.

Forestry continued to put a floor under land prices, in 2020. Depending on the county, that floor is from €4,000/ac to a top of €6,000/ac for bare planting land.

Dearest and the cheapest counties

Each year, the Irish Farmers Journal Land Report shows large variation between farmland prices in different counties. Land price can be four or even five times’ higher in some counties than in others. That same huge variation was present in 2020. The difference was again a factor of four between the counties with the highest and the lowest prices for farmland.

In 2020, prices rose in 16 counties in the Republic and fell in nine. The three counties with the highest prices were Donegal, Kildare and Waterford. In recent years Kildare has regularly been in the top three for price.

Prices there are driven by proximity to Dublin. Expansion of towns in the county and the building of roads exerts upwards pressure on farmland in the county. The average price in 2020 was €16,446/ac. This was a significant increase from the €15,166/ac of 2019 and €13,621 of 2018.

Waterford has in recent years been mid-table. However, average price in the county in 2020 was €16,367/ac. This was a huge increase from the €10,506/ac in 2019 and €10,446/ac in 2018. One factor behind the increase is the ongoing demand for farmland for dairying. A number of larger holdings were put on the market in the county in 2020.

In recent years, Donegal has also sat mid-table or a little under it on prices. However, because of the quirks of 2020, average farmland price there last year was €17,716/ac. This compares with an average of €6,089/ac and €7,688/ac in 2019.

The jump in average price was because of the limited number of farms put up for sale.

These three counties were followed by Armagh, Wexford, Laois, Kilkenny, Down, Meath and Cork, all counties which in recent years have seen strong farmland prices.

The three counties with the lowest prices in 2020 were Leitrim, Clare and Mayo.

Average price in Leitrim was €4,391/ac. That was down from €5,479/ac in 2019 and €5,222/ac in 2018. The number of farms put up for sale in the county, and the number of acres, fell by more than half last year. Of the 22 holdings put up for sale, 15 sold.

Land prices in Clare tend to be in the lower third of the table of counties.

Average price in the county in 2020 was €5,798/ac. This was a sharp fall on the €7,584/ac in 2019 and the €6,913/ac of 2018. It’s likely that the sharp movement happened because of the reduction in the number of farms put up for sale.

Our survey tracked just 12 farms in the county put up for sale in 2020 with eight of them selling.

In recent years, Mayo has had a lower average price per acre, reflecting the challenging farmland in parts of the county. Last year, prices in Mayo jumped. The average price was €6,290/ac. That compares with €4,809/ac in 2019 and €5,598/ac in 2018.

Last year, prices in Mayo jumped. The average price was €6,290/ac

Next in the line of counties with the lowest average prices in 2020 were Fermanagh, Monaghan, Galway, Roscommon, Sligo and Westmeath.

Number of farms for sale

The two big counties of Cork and Tipperary led the way – by a distance – in the supply of land and farms for sale. Four other counties saw a number of farms and acres put up for sale.

Cork landowners put 153 holdings up for sale and they contained 6,986ac.

In Tipperary, 99 farms were put up for sale and they accounted for 4,729ac. The two counties had just over a quarter (27%) of all the farms put up for sale in 2020 and a similar share (25.6%) of the land offered.

Four other counties saw 50 or more farms go on the market. They were Limerick with 65, Galway with 61, Roscommon with 52 and Westmeath with 51.

Besides Cork and Tipperary, four other counties saw more than 3,000ac put on the market. These were Limerick with 3,557ac, Meath with 3,457ac, Mayo with 3,372ac and Westmeath with 3,158ac.

Not surprisingly, Dublin was the county where the buying opportunities were thinnest on the ground. Four farms were put up for sale accounting for 178ac, the lowest of all counties under both headings.

Besides Cork and Tipperary, four other counties saw more than 3,000ac put on the market

Other counties where fewer than 20 farms were placed on the market were Donegal, Louth, Monaghan, Clare, Longford, Waterford, Wicklow, Offaly and Carlow.

Aside from Dublin, other counties where fewer than 1,000ac were placed on the market were Louth, Monaghan, Donegal, Longford, Leitrim, Laois, Sligo, Wicklow, Clare, Carlow and Kilkenny.

Additional COVID-19 movement restrictions were placed on Donegal, Monaghan and Cavan last autumn and these restrictions may have further discouraged landowners from putting their land on the market.

The three counties were moved up to Level 4 from Thursday 15 October, at a time when the rest of the country was at Level 3. For example, in 2019 Monaghan landowners put 940ac up for sale but in 2020 the figure fell to 293ac. In Donegal, 2,283ac were put up for sale in 2019 compared to just 324ac in 2020.

However, there was no such major drop in Cavan. That area put up for sale in 2019 was 1,392ac while it was 1,348ac last year.

Auctions

Another standout feature of 2020 was the swing from public auction over to private treaty, driven of course by COVID-19 lockdowns. In 2018, almost one-third of farms that came on the market were offered by auction. In 2019, that fell to 29%.

Last year, it collapsed to 17.7%.

The public auction route has a number of benefits for the selling landowner.

Auction will usually be recommended by the auctioneer for the more choice, high-profile farms, where there is likely to be a number of potential buyers.

The aim is, of course, to obtain the highest possible price for the seller. Auction often suits where the layout of a holding is suited to selling in lots, usually to different buyers.

Auction will usually be recommended by the auctioneer for the more choice, high-profile farms

Another key benefit is that the sale process, to completion, is faster for the selling landowner than a private treaty would be. That’s of benefit to auctioneers, too.

Nowhere was the swing to private treaty seen more clearly than in Cork. Despite the county putting by far the largest number of farms onto the market, just five of them were offered by public auction. Some 145 other farms were advertised by private treaty and three by tender.

Ten other counties saw more farms offered by public auction than Cork.

Two counties saw no farmland offered by public auction: Dublin and Louth. Only one farm was put on the market by public auction in Kerry. Monaghan, Waterford, Longford and Leitrim each offered two farms for sale by public auction. Mayo and Wicklow had three holdings offered by auction.

In contrast to Cork was its neighbour Tipperary where 20 of the holdings put on the market were offered by public auction. This was the highest number of any county.

Tipperary also had the highest number of holdings put on the market by tender, at six.

However, the counties with the highest proportion of farms offered by auction were Wexford and Meath. In Wexford, 18 of the 37 holdings that were put up for sale were offered by auction.

In Meath, 18 of 49 holdings that went on the market were offered by public auction. The auction route has always been popular in these two counties.

Ten or more farms were offered by public auction in Galway, Westmeath and Laois.

Dealing with the lockdowns

Matters were further complicated for landowners and auctioneers when COVID-19 lockdowns were announced and ensnared some auctions which had been planned weeks in advance.

A number of auctions were cancelled, with the holdings then offered by private treaty instead.

Auctioneers had to be very adaptive. Some switched the venue for auctions from their own auction rooms or from the local hotel to an outdoor venue.

Successful auctions were held on the land with bidders standing in their own immediate pods, socially distanced from other bidders. Some were held in car parks, some at local livestock marts.

A number of auctioneers held auctions on the land but asked all bidders to remain in their cars.

The auctioneer, masked up, walked around from car to car taking bids.

A number of auctions were moved fully online. Auctioneers were able to use any of a number of off-the-shelf online bidding programmes.

A number of auctions reported they received bids from individuals located outside the country via the internet.

In a number of cases, out-of-country bidders bought properties.

Business people were the big buyers

Recent years have seen more land being bought by business people and – after the ending of milk quotas – by dairy farmers.

Last year business people were again the single biggest category of buyer. They were the buyers of 150 farm holdings, or 33% of the 455 for which the buyer is known to the Irish Farmers Journal. That’s well up from 2019, when business people made 20% of purchases.

The business buyer category includes investors who had no involvement with farming when making this purchase. It includes individuals who already have land and farm it but make the majority of their income from a separate business.

Many auctioneers commented during 2020 about the number of farmland holdings being bought by investors and business people. A small number of large farms were bought by investors who planned to then lease out the land to a dairy farmer and to avail of the income tax relief on the rent.

Another auctioneer, fresh after selling at an auction where the land went to a non-farmer, said: “The business buyer is back.”

He explained that he meant that business people stopped buying farmland after the economic crash of 2008 but are now back buying at the levels seen in the early 2000s.

As in recent years, drystock cattle were the next biggest category, buying 106 holdings or 23%, down slightly from the 24% of 2019.

Next were dairy farmers who bought 93 holdings which was 20% of transactions, down from 24% the previous year.

Among the trends, dairy farmers tended to buy both large and small parcels of land – proximity to the grazing platform makes even a small field of interest to a dairy farmer.

Drystock farmers tended to be buyers of smaller holdings, usually well under 40ac.

It was noticeable last year that when a dairy farmer wanted a piece of land they were regularly willing and able to outbid everyone else, including the business bidder, and paid up to €26,000/ac, in a small number of cases, for land over the hedge.

Mixed farmers – typically in drystock cattle and sheep but in some cases with milk or tillage too – were next most active, buying 70 properties or just over 15%.

Tillage, sheep and “other” farmers bought the remaining 36 farms which was equivalent to 10% of the total.

The “other” category of buyer includes some pig farmers and poultry farmers who were buyers of a small number of sizeable blocks of tillage land in 2020. One auctioneer commented that these farmers were buying land to have access to their own feed grain for their pigs or poultry.

There was good demand for bare, forestry planting land, from forestry companies. It seems that more and more of this land is being bought on a subject-to-planting-permission basis. This slows down the payment day for the seller.

Only the best-quality planting land is being bought outright with immediate payment.

Observers are already looking ahead wondering what trends will be repeated in 2021.

With the country in Level 5 lockdown since the start of the year, 2021 has not got off to an easy start for auctioneers or for farmers considering selling land. Auctioneers have been reluctant to put their clients’ farms on the market until nearer to the end of the current severe restrictions.

The key question is what will happen supply of land in 2021, following the 25% reduction seen in 2020.

If as generally believed, that cut was due to the pandemic, then it is likely there is pent-up interest among some farmers in putting land up for sale.

In a normal scenario that would lead to an increase in the number of farms and acres available in 2021.

The key question is what will happen supply of land in 2021, following the 25% reduction seen in 2020

However, it will be the evolution of the pandemic which will decide if this is the case.

It has now been announced by the Government that the restrictions that have been place since the start of the year will continue on through March and April. That is disappointing news for landowners looking to sell land and for their auctioneers.

It has also become clear in recent weeks that even if the country exits Level 5, there will continue to be significant restrictions on business, including the property market, until midsummer at least.

This all makes it difficult to see any significant increase in supply of farmland for sale on to the market in the first half of 2021.

However, there is still a possibility that supply will increase sharply in the second half of the year, if restrictions are eased.