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Teagasc report shows land-price increase in Munster

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The Society of Chartered Surveyors Ireland (SCSI)/Teagasc Agri Land Market Review and Outlook 2018 found that prices in Munster have increased, on average, by 11 per cent, but declined elsewhere, with the biggest falls occurring in Connaught/Ulster.

According to the review, the national average agricultural-land value in 2017 was €8,308 per acre for non-residential land. The increases in Munster bring average per acre value to €9.9k, slightly ahead of Leinster (excluding Dublin) on €9.8k with both almost twice ahead of the €5.5k per acre reported in Connaught/Ulster.
Selling prices in Munster for medium-sized holdings – between 50-100 acres with a residence – increased by 17 per cent while those without a dwelling rose by 13.5 per cent. 
For holdings over 100 acres, the increases were 10.5 per cent with a residence and 14.5 per cent without a dwelling. For small holdings, up to 50 acres, the increases were 10 per cent and 2 per cent respectively. 
Miah McGrath, chair of the SCSI’s rural agency group, said the rebound in land values across Munster was strongly linked to the rise in milk prices. “Dairy farmers are clearly in expansion mode and that is what is driving prices across the province. Milk prices have been on the rise for a sustained period and are now holding in the mid-30 cent-a-litre range. That is giving confidence to farmers and even if prices look set to come back 10 per cent this year, the impetus remains to expand production. The other factor affecting values is more historic and relates to the slow turnover of land. For that reason, when a good farm comes on the market, there’s always a lot of interest.” 
Comparatively, Leinster experienced a decrease in all categories by an average of 4 per cent. Prices for medium-sized holdings – 50 to 100 acres – recorded the biggest falls.
The most negative land-market developments in 2017 were reported in Connaught/Ulster where values decreased across all land categories and in some case by almost 20 per cent. The decreases effectively erode the increase in values in 2016. The biggest decrease reported in Connaught/Ulster was for transactions in excess of 100 acres where holdings with a residence fell by 15.5 per cent and those without by 18.5 per cent. For medium-sized holdings the falls were 13.5 per cent with a residence and 15.5 per cent without. Smaller holdings recorded the smallest declines – 5 per cent with a residence and 2.5 per cent without.
Trevor Donnellan, head of the Teagasc Agricultural Economics and Farm Surveys Department said the declines in Leinster and Connaught/Ulster may be due to more localised issues. “In Connaught/Ulster, the holdings are traditionally of a smaller size and the fact that these holding recorded the smallest declines suggests that local farmers are looking to bring their farms up to the 100-acres plus mark. It’s unusual to see land values in Munster surpass those in Leinster, albeit by a very small margin. This underlines the strength of the Munster market but also possibly reflects that we are now seeing more realistic pricing in Leinster.”
Nationally, 45 per cent of SCSI members surveyed anticipate an increase of some sort for agricultural land values in 2018, with around half of those (22 per cent) expecting any increase to remain below 5 per cent. This represents a more positive outlook for agricultural land values than 2016 when only 33 per cent of SCSI members expected an increase. Forty-two per cent of members anticipate no change while only 13 per cent predict a decline in values.
Trevor said that milk prices in 2018 are forecast to be lower than in 2017 and this will likely be reflected in a decline in the level of farm profitability in 2018. “The extreme shortage of fodder during the spring of 2018 will have led to higher feed bills on many Irish farms. Despite ongoing growth in the volume of milk production in Ireland, incomes earned in 2018, because of lower milk prices and higher feed and other costs, are likely to be down on levels observed in 2017.”
While there was an increase in rents in Leinster, rents in Munster and Connaught/Ulster, with a few exceptions, notably tillage, tended to show stability. The forecast by 52 per cent of SCSI members that rental values will increase is greatly more optimistic than 2017 when only 35 per cent of respondents forecast an increase in rental values.
An interesting development was the increase in tillage-land rents in Munster with an increase also evident in Leinster, with the expected driver of the increase thought to be due to demand from dairy farmers, which may be pushing up tillage land-rental rates in areas where dairy farming is prevalent.

Tags: Teagasc milk prices tillage dairy farming dairy farmers The Society of Chartered Surveyors Ireland (SCSI) Munster Leinster Connaught/Ulster SCSI rural agency group agricultural land-value Teagasc Agricultural Economics and Farm Surveys Department land-rental rates milk-price forecast