Demand pushing up prices

The lack of available land is temporarily pushing up prices whilst the allocation of the single payment scheme (SPS) entitlements is awaited.

Gerald FitzGerald, partner at Cluttons, said: "I believe that once entitlements have been allocated and normal supply resumes, prices will revert to levels similar to those we witnessed before the announcement of the SPS.

"However, in the longer term, as long as the current tax advantages in owning agricultural land continue, supply and demand will continue to dictate land values. Presently, the overall trend is of falling supply and rising values. Land prices should become much more localised reflecting local supply and demand factors.

"In theory, the SPS should not affect the value of pasture land as subsidies were already decoupled from pasture. Following this logic, arable land may experience a drop in value approaching but less than the entitlements value, as the subsidy is decoupled. We may however not be able to monitor this against longer term trends. I believe there will also continue to be a differentiation between arable and pasture reflecting the land's better quality and flexibility."

FitzGerald added: "There is however a danger of concentrating too much on the SPS entitlements. As a result of the changing agricultural environment, land owners need to focus on the longer term affects. As part of our 'Pride of Ownership' initiative, we are finding that the role of land and enterprises is changing and that business goals and objectives should now be reviewed."

Cluttons, 05.06.2005

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