It has been a positive year for sales of farmland in Northern Ireland. Although the acreage of land sold has fallen, the average price paid has risen by 6% or £531/acre. In our annual survey, prices were obtained from almost 60 auctioneers and estate agents covering almost 5,800 acres and the average price worked out at £9,256 per acre.

The year 2014 started well for most sectors, in particular dairy, with milk prices at 33p/litre for the first half of the year before falling to current levels of 20p/litre to 22p/litre. The beef sector had a mixed year – prices were weak over the summer before strengthening by the end of the year and are currently the second best in Europe. Grain farmers enjoyed good weather for the growing season and at harvest, but prices fell at harvest time.

The big issue affecting the industry is the CAP reform plan due for introduction in mid-2015. All farmers and landowners will be affected, with a new basis for payments, aid restricted to active farmers, new rules on greening and additional support for suitably qualified young farmers. The plans have created a scarcity of land to rent and, in the opinion of some auctioneers, encouraged some landowners to seek to establish the new entitlements on their land before offering it for sale. These factors may well have restricted the amount of land coming on the market, especially during the second half of 2014.

Our survey includes 205 farms and parcels of land comprising a total of 5,786 acres. While this was only 13 lots fewer than last year, the acreage sold was 2,450 lower. The average price was £9,256 per acre, which was up £531 or 6.1% on 2013. The results indicate a reversal of a four-year trend of falling prices. In 2010 our survey showed an average price per acre of £9,585, followed by £9,207 in 2011, £8,843 in 2012, and £8,726 in 2013.

Using a rate of €1 equals 74p, the average price in 2014 is equivalent to €12,508/acre. This is just under €2,000 higher than last year, with around 25% of the increase coming from the rise in prices and 75% coming from changes in the exchange rate.

In NI, the vast proportion of sales are by private treaty through auctioneers and estate agents, with very few examples of sale by public auction. Only two public auctions were noted in our survey (see Co Down).

Many sales were for small acreages, in some cases a single field. The average size of lot was 28 acres and the median was 23 acres. There were 183 lots from 3 to 60 acres; 15 lots from 60 to 90 acres; and only 6 lots above 90 acres. As one estate agent commented, “there is a distinct shortage of good farms of 100+ acres coming available for sale”.

Farmers are buyers

The auctioneers and estate agents reported that most of the land they sold went to farmers. They said that in many instances they have farmer clients on their books, awaiting the right piece of land to come available in their locality. And when such land comes up, the farmer will make a determined bid to secure it.

However, there is competition from other sources – a number of the best prices paid for land were by farmers who have another business interest (See Co Down).

Hill land

Auctioneers across NI report that there is a good market for hill land. This may be linked to the new EU support being area-based, leading some farmers to seek additional acres at lower prices to improve their prospects for entitlements. Hill land and poor-quality lowland was kept separate from our main survey. We noted sales of 687 acres of hill land and it averaged £2,434/acre (or €3,289/acre). This was slightly lower than our 2013 average of £2,571/acre. Prices of hill land were good in Derry/Londonderry, Antrim and Tyrone, but lower in Fermanagh.

Sales of estates

Two major estates were offered for sale in 2014. In north Co Antrim, the Dundarave estate at Bushmills changed hands for a sum reputed to be above £10m (€13.5m) to Dr Peter Fitzgerald, the owner of medical tests company Randox Laboratories.

The former seat of the MacNaghten clan, the estate has around 1,200 acres and includes Dundarave House, a very grand Grade 1 listed 19th century stately home with 19 bedrooms, parkland, gardens, woodland, good-quality farmland and farmyards, and a substantial pheasant shoot. The gate lodge is Grade 1 listed and there are five other estate cottages. Most of the properties, including the big house, have vacant possession.

Across at Limavady, the 700 acre Drenagh estate was offered for sale. With a stately Georgian mansion, the property has farmland, woodland, formal gardens, extensive outbuildings, stabling and five other dwellings.

The estate was offered for sale at around £10m after its main bank lender withdrew support from the owners of the estate with debts to the bank of £3.2m. It is understood the family is back as owner of the house and estate after a sale of some of the land for a reputed £5m to a businessman. The acreage changing hands has not been revealed.

Given the unique nature and size of these properties, they have not been included in our price survey.

Bank lending trends

The banks play a pivotal role as a source of funds for land purchases and we asked four of them about their attitude to lending for land

Danske Bank

John Henning of Danske said the bank continues to view the agricultural sector very positively. Its share of the published lending to the agriculture sector in NI continues to grow. Danske has a team of 30 agribusiness managers and advisers in daily contact with farmers

“All lending applications are assessed on a case-by-case basis with a focus on the capacity to service the debt as demonstrated by physical and financial performance of the farm business. Our high credit approval rates and independently monitored customer satisfaction scores demonstrate that Danske Bank continues to be open for business,” said Henning.

“Land purchase constitutes a significant share of new business activity and indications from across our agribusiness team suggest this trend will continue. Land purchase transactions may be for land previously taken in conacre, strategic acquisition based on location to existing lands and business expansion.

“Our agribusiness managers reported increased requests for funding during 2014, particularly for smaller holdings (under 40 acres). Land prices continue to be influenced by location, land quality and the acreage offered, with location beside existing holdings a key factor affecting interest and the sale price achieved – across the country prices were generally higher than last year.”

At this stage it would appear that activity among both sellers and buyers will increase in 2015 despite the remaining uncertainty around CAP reform, the effects of ‘active farmer’ status and ongoing sectoral difficulties, particularly in dairying.

Ulster Bank

Cormac McKervey of Ulster Bank said: “Our attitude to funding land purchases remains unchanged. If the farmer can service and secure the proposed debt then it’s likely that funding will be granted. The normal term is 15 years with up to 18 months of interest-only at the outset; however, we can lend up to 20 years in certain cases”.

Ulster Bank won’t lend for speculative land deals but for normal, active farmers wishing to expand their operations. Given the length of term of the borrowing involved, the SFP on the land is not a major issue. In the present year there may be some disruption, as landowners may want to secure and establish new entitlements first.

Much of the land bought over the last 18 months has been by dairy farmers. However, they will have a reduced appetite this year and some farmers may defer buying land in favour of availing of the likely grant available under the farm business improvement scheme. The view of the bank is that land price is unlikely to change significantly in the near future – if the landowner is not getting a good enough price then he/she can withdraw from the market now and offer it for sale next year together with the new entitlements.

Bank of Ireland

William Thompson at Bank of Ireland said: “Bank of Ireland are actively lending to farmers in NI and our appetite remains as strong as ever. We are fully aware of the reduction of farm incomes in 2014, and the challenging market conditions, particularly for the dairy sector. However, we understand that NI farmgate prices are driven by global commodity prices and we are prepared to work with our existing customers and others through this challenging period and in this context Bank of Ireland will be taking a medium- to long-term view.”

“Managing cashflow is always important for any business regardless of the sector, and when a business experiences a significant fall in margins, then short- to medium-term cashflow projections are vitally important to the longer-term sustainability of the business. In the past, Bank of Ireland has, and will continue to stress test all cash flow projections including any projected increase or reduction in farm subsidies.

“In relation to land purchases, our position remains unchanged. A general rule of thumb would be, for existing farm enterprises with strong trading accounts we would consider up to 100% funding of the proposed transaction, on the basis that overall security is minimum 70% loan to value.

“Regarding standalone land purchases, we will lend up to 70% of the total cost, on the basis that repayment capacity is clearly evident. We have no upper limit on the value of an acre of agricultural land and we assess each case on it’s own merits with affordability being high up on our list of criteria.”

First Trust Bank

First Trust Bank is making renewed efforts to service the farming sector and new agri-specialist Kieran Mailey says the bank recognises the importance of the farming sector in our national economy.

“We have put in place a long-term strategy to grow our agri-business. We have been growing market share year on year and lending for land purchases is considered a core part of our business. We are committed to helping farmers grow their business and have developed a £50m agrifood package to assist them in realising their goals.

“The agrifood loan, which is available to existing and new customers, covers all aspects of farm investment and land purchase as farmers look to consolidate the business.

“There are no minimum or maximum limits on what can be borrowed. A number of factors are considered when making our lending decision including the farm’s ability to repay from its sustainable cashflow, security available, historic trading performance, the long-term strategy of the farm and the level of farm management in place.

“Lending periods are flexible and can be agreed for up to a maximum of 20 years to allow future investment. There is also no arrangement fee under our agrifood loan and the frequency of repayments can be structured to suit the cashflow of the business. There is one year of transaction-free banking for new customers, or three years free banking for young farmers under the age of 45 who avail of the package.

“We remain committed to supporting farmers and with farming affected by seasonality and global markets, our focus is on providing long-term support. We have 16 dedicated and trained agri-advisers across our branch network.

“First Trust Bank wants to lend to farming enterprises which are viable and can demonstrate an ability to repay borrowings from sustainable cashflow.”