UK rural property: Navigating the green maze
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
12 minutes to read
Opinion
As many of the articles below highlight, the green grip of policymakers and corporations on agriculture is only likely to tighten over the coming months and years. Those farmers who just want to be left alone to produce food are going to find it increasingly hard as the focus on natural capital and hitting net zero targets tightens, albeit in an environment where government is failing to deliver on its own commitments and greenwashing allegations are on the rise. Navigating this brave new world will be tough and treacherous, but there are opportunities and financial rewards for those that hold their nerve and take the right advice. It is easy to complain that the food supply chain deck is stacked against the primary producer, but that makes innovative, forward-looking thinking even more vital.
Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update directly to your email here.
Andrew Shirley Head of Rural Research
In this week's update:
• Commodity markets – Still bearish
• Environment – Government missing targets
• Flooding – Government missing targets
• Green tractor – Morrisons to pay farmers
• World Economic Forum – Agri update
• Overseas news – EU greenwashing ad ban
• BNG – Go live date confirmed
• Carbon calculators – Sandy the best
• Deer – Scottish consultation open
• Holiday pay – Be aware of changes
• Right to rent – Fines on the up
• HS2 – Northern leg back on track?
• Diversity – Historic leisure and ag opportunity
• English wine – Boutique Kent vineyard for sale
• Farmland prices – Market at peak?
• Country houses – 2023 better than expected
• Development land – Prices still falling
• The Rural Report – Watch the videos
Commodity markets
Commodities – Markets still bearish
Red diesel prices are rising at a higher pace than crude oil values, which have remained relatively unpanicked – edging up just a few percent on the week - despite continued Houthi attacks on shipping in the Red Sea. Traders are apparently cautious about reacting too bullishly to the bad news due to China’s ongoing economic slowdown. Local pump prices seem unchanged so it could be that the recent cold snap in the UK has pushed up demand for red diesel. Meanwhile, the USDA’s first World Agricultural Supply Demands Estimate (WASDE) of the year provided more ammunition for grain market bears, according to trader Frontier. Estimates for Ukraine and Russian wheat production are up by 900,000 and one million tonnes, respectively. Global stocks of wheat and corn look well able to cope with any extra demand.
Talking points
Environment – Government missing targets
The government remains largely off track to meets its wide-ranging legally binding environmental targets and the goals of its Environmental Improvement Plan, and must speed up and scale up its efforts in order to achieve them, according to the latest progress report from the Office for Environmental Protection (OEP). Given that many of the targets relating to chemical usage, water pollution, tree-planting and biodiversity directly involve farmland, rural landowners will no doubt come under further pressure to help government deliver its targets.
The thought-provoking and very detailed report also laments: “Key policies, strategies and regulatory frameworks are announced and anticipated, but not then developed or delivered. For example, major initiatives, such as a Chemicals Strategy and a Land Use Framework, are long awaited. This creates uncertainty, presents barriers to progress, and results in missed opportunities.”
Flooding – Government missing targets
The government’s flood defences strategy also came under flak from the Public Accounts Committee last week. Its latest report claimed: “There are 5.7 million properties in England at risk of flooding. Despite the government’s ambition to create a nation more resilient to flooding, it has not defined what this means: it has no measure of resilience to measure progress against. While the ongoing capital programme expects to improve protection for 200,000 properties by 2027, some 203,000 properties are currently at increased risk of flooding due to the deterioration of existing flood defences.”
Green tractor – Morrisons to pay farmers
Last October The Rural Update reported on farmer uproar over the potential addition of an environmental module to the Red Tractor farm assurance scheme. Food producers were concerned that the module, although initially voluntary, would become compulsory enabling the big supermarkets to trumpet their environmental credentials without having to pay suppliers for the extra costs incurred. Now, as reported in Farmers Weekly, Morrisons is apparently considering paying a premium to those who join the module if it is eventually launched.
World Economic Forum – Agri update
My invitation to this year’s annual jamboree of political and corporate powerbrokers in the swanky Swiss ski resort of Davos must have got lost in the post, but there were a few announcements relevant to the farming industry. In conjunction with the consultancy giant Bain, WEF launched a weighty report on regenerative agriculture that it says reveals “a breakthrough model of financing and collaboration supporting farmers can speed up the transition to sustainable food production”. Meanwhile, the Taskforce on Nature-related Financial Disclosures (TNFD) was “delighted to announce that 320 organisations from over 46 countries have committed to start making nature-related disclosures based on the TNFD Recommendations published in September last year.” This first cohort of adopters of the TNFD recommendations apparently represents US$4 trillion in market capitalisation.
Overseas news – EU greenwashing ad ban
The European Parliament, as reported by Edie, has just voted to implement a new directive that bans businesses from making misleading or hard-to-understand green claims aimed at consumers. Firms selling in the EU will not be permitted to make vague claims about the environmental impact of their products or services unless they can be backed up with evidence. Claims in the firing line include ‘eco-friendly’, ‘environmentally friendly’, ‘natural’, ‘recycled’ and ‘biodegradable. Carbon offsetting claims are also in the firing line. Businesses will essentially be banned from labelling their offerings as ‘climate-neutral’ or ‘carbon-neutral’ if they rely on offsetting to balance their emissions. This is due to widespread concern about the credibility of some carbon offsetting schemes. “Carbon-neutral claims are greenwashing, plain and simple,” said Ursula Pachl, the deputy director of EU consumer advocate body BEUC. The rules will kick in from 2026.
Need to Know
BNG – Go live date confirmed
Biodiversity Net Gain requirements will finally kick in from 12 February the government has confirmed. Under BNG, anybody building new residential or commercial properties will have to replace any biodiversity lost, plus an additional minimum of 10%. Smaller developments (1 to 9 houses) have until 2 April before they come under the scope of new rules. BNG credits can either be delivered onsite or purchased from a third-party supplier. Read our detailed guide to BNG.
Carbon calculators – Sandy the best
The recently released results of a detailed 12-month Defra study into the performance of the six most relevant tools for UK farmers to assess their carbon footprints have demonstrated that Trinity Agtech’s Sandy navigation platform uniquely covers all essential criteria, including the calculation, data, standards, and assessment scope. The firm said: “It has always been Trinity’s vision to develop a practical, scalable, and agile natural capital navigator that aligns with the latest reporting standards and has the power to deliver an agricultural transition in which everyone benefits. We are therefore extremely proud of this achievement and thank Defra, its investigators, and reviewers for their rigorous efforts in helping to end confusion, greenwashing, pseudo-science and box-ticking practices.
Knight Frank is a founding member of the Trinity Natural Capital Pro Council, which aims to help rural businesses make the most of their natural capital by working collaboratively to support credible natural capital valuations and best practices. Contact Mark Topliff for more information.
Deer – Scottish consultation open
The Scottish Government has opened a consultation on how the country’s burgeoning deer population should be best managed in terms of both its effect on the environment and socio-economic contribution. Deer numbers in Scotland have doubled over the past three decades to around one million. Proposals respondents to the consultation can share their opinions on include increasing NatureScot’s power over deer management as well as making it easier to get more venison into the supply chain.
Holiday pay – Be aware of changes
Our client finance guru Elin Jones has just reminded me that rural businesses need to be aware of changes to the law that have just kicked in regarding how holiday pay is calculated, especially for employees working irregular hours. It all looks quite complicated and only applies in Great Britain, not Northern Ireland. Do take specialist advice if you think you may be affected.
Right to rent – Fines on the up
Something else that rural estates need to be aware of is a steep hike in the fines for residential landlords not complying with their right-to-rent responsibilities. Kicking in from today (January 22), those who knowingly rent properties in breach of the rules will now be fined up to £5,000 per lodger and £10,000 per occupier for a first breach, an increase from £80 and £1,000 respectively. Repeat breaches can be fined up to £10,000 per lodger and a maximum of £20,000 per occupier, up from £500 and £3,000. “The fines are now severe, so you don’t want to inadvertently fall foul of the legislation,” points out my Rural Consultancy colleague Jess Waddington.
HS2 – Northern leg back on track?
The front page of the Sunday Express caught my eye as I brought breakfast at our local Co-op yesterday morning. Apparently, rival mayors Wes Streeting (West Midlands, Conservative) and Andy Burnham (Greater Manchester, Labour) have hatched a cross-party initiative to get the northern leg of HS2 back on track using private finance. Rishi Sunak angered politicians and businesses in northern England when he scrapped the Birmingham-to-Manchester leg of the controversial rail project last year due to escalating costs. Your guess is as good as mine as to whether this new plan will ever get off the ground, but if you are a potentially affected landowner looking for advice please contact our compensation team.
On the market
Diversity – Historic leisure and ag opportunity
Our Farms & Estate team has just launched something a little bit different. Finchale Abbey, near Durham, is an established residential, leisure and agricultural business comprising an 81-pitch residential park village, a touring holiday park and glamping site, established café business, short stay apartment, fishing on the river Wear and 245 acres of agricultural land and buildings. The guide price for all this is £5 million. The farmland is also available as a separate lot for £2 million. Contact my colleague Georgie Veale for more information.
English wine – Boutique Kent vineyard for sale
Just to knock this Dry January malarky properly on the head, I’ve got another English vineyard to tempt you with. Barnsole is a seven-acre award-winning vineyard located east of Canterbury in Kent, the world’s fastest growing wine region. Planted in 1993, the boutique winery is also one of the county’s oldest vineyards and is popular with wine tourists. The property is guided at £1.5 million. Contact my Kentish colleague Will King for more information on this hidden gem.
Our Latest Property Research
Farmland prices – 2023 ends on a high
The Q4 2023 instalment of the Knight Frank Farmland Index has now been published. The average value of bare agricultural land rose by 2% in the final quarter of the year to break the £9,000/acre barrier for the first time. Annual growth was 7%, which outperformed a number of other asset classes. Our research suggests values may flatten out this year, but supply remains limited and demand robust. Read the full report for more insight and analysis.
Country houses – 2023 better than expected
Kate Everett-Allen, our international residential research guru, has added the country homes market to her portfolio and has a bit of good news to report. “Prime country house prices declined by 5.8% in 2023. While this figure represented a sizable correction after two stellar years of growth, the rate of decline was lower than our forecast of -7% for the year. A growing sense that mortgage rates are at, or close to their peak, began to influence market sentiment towards the end of the quarter – a theme we expect to build this year. That’s not to say prices and sales volumes will bounce back strongly. Although the Bank of England opted to hold interest rates at 5.25% in December, the cost of borrowing remains at a 15-year high.” Read Kate’s full report.
Residential – Our forecasts revised
Better-than expected inflation figures leading to lower mortgage rates mean my research colleagues have revised their forecasts upwards for the wider UK housing market. Head of UK Residential Research Tom Bill says: “We now expect UK mainstream prices to rise by 3% in 2024, which compares to a decline of 4% predicted in October. With low-level single-digit growth in subsequent years, we expect cumulative growth of 20.5% in the five years to 2028.”
Development land – Prices still falling
The latest findings from our Residential Development Land Index show values are continuing to fall. “UK greenfield and urban brownfield values fell on average by 2.4% and 2% respectively in Q3 2023. In prime central London, land prices were flat during the quarter,” writes my colleague Anna Ward. “Average urban brownfield land values across England have now fallen by 20% since the most recent peak of the market in the first quarter of 2022 up to Q3 this year, with greenfield values down 17% during this period. But this quarter we have seen price falls start to moderate in nearly all areas,” adds Anna.
The Rural Report – Watch the videos!
You've read the book, now watch the videos! To complement the thought-provoking articles contained within the 2023/2024 edition of The Rural Report our whizzy Marketing team has also created a series of videos featuring many of the report's contributors. Head to our very own YouTube channel to discover more about biodiversity net gain and regenerative farming; find out how we are helping Guy Ritchie's Ashcombe Estate on its diversification journey; and read about the travails of an entrepreneurial Zimbabwean searching for a farm for his family. Plus, lots more.