UK rural property: Trade matters
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
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Opinion
Call me a cynic, but can it be a coincidence that with a general election just around the corner and its approval ratings waning somewhat, policymakers have finally taken a tough stance on a post-Brexit free trade deal? Having upset farmers by quickly wrapping up agreements with New Zealand and Australia in 2021 and 2022, deals that it was claimed would put the UK’s agricultural producers at a disadvantage versus their Antipodean colleagues, the government has now stalled talks with Canada over hormone-treated beef and cheese tariffs. Whatever the reasons for the pause in discussions, UK farmers will be glad to see that they won’t have to compete with imports produced using systems that would not be permitted here. However, others will point out that it is concerning that our trade position with Canada is now less favourable than it was when we were in the EU.
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 – Wheat hits low
• Trade – Canadian beef beef
• Green labelling – Consumers in dark
• Housing – Grey belt numbers revealed
• Grants – Productivity scheme now open
• Vat – Relief for energy saving kit
• Rents – Defra figures show drop
• Tenancy reform – Consultation closing soon
• Exmoor – More acres available
• 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 – Wheat hits low
Last week, UK wheat futures fell to new contract lows despite support for US and European wheat markets. According to trader Frontier, UK feed wheat prices remain around £10/t too expensive to compete for export market share. Traditional EU export destinations, such as Spain and Ireland, continue to find cheaper offers from elsewhere. Domestic demand in the feed and ethanol sectors has also been less than expected, and with no exports UK feed wheat prices are likely to keep falling. For those farmers with plenty of storage capacity November 2024 futures offer a £15/t premium on May 24 values. Meanwhile, oilseed rape values have recovered slightly as European crushers take more cover.
Talking points
Trade – Canadian beef beef
Negotiations between the UK and Canada on a post-Brexit trade deal have broken down after nearly two years, following a row over beef and cheese. Canada has been pushing for the UK to relax a ban on hormone-treated beef, which its producers say in effect shuts them out of the British market. Meanwhile, the UK has concerns about Canada putting import taxes of up to 245% on British cheese products. NFU President Minette Batters said she was glad the UK government had not "given way" on hormone-treated beef.
"We have already damaged our economy and agricultural sector by fully liberalising on trade deals with Australia and New Zealand. We had to take a strong line on this." But the impasse mean the UK's trading terms with Canada will now be worse than when it was part of the EU.
Green labelling – Consumers in dark
Last week I reported that the EU is banning firms from using misleading green claims when selling their products and services. Now, as reported in Edie, a new survey reveals that most British shoppers don’t really understand some of the most frequently used terms often in relation to food production – such as carbon offsetting, circular economy and biodiversity, anyway. While three-quarters of survey respondents had heard the term ‘sustainability’ or ‘sustainable’ in relation to businesses, only a quarter felt they could confidently offer up a definition.
An awareness-understanding gap was also found in relation to more specific terms about carbon emissions. Six in ten had seen businesses use the term ‘net-zero’, rising to almost seven in ten for ‘carbon-neutral’. Yet only 11% felt confident in their understanding of carbon offsetting, which most brands and businesses will need to use to some extent to achieve net-zero or carbon neutrality. Among those who had seen businesses use ‘net-zero’ or ‘carbon-offsetting’, the perception of the term was only slightly positive. Levels of awareness and understanding were even lower around the terms ‘biodiversity’, ‘traceability and ‘the circular economy’.
Housing – Grey belt numbers revealed
A new study by my residential development research colleagues has revealed that there are over 11,000 previously developed sites – dubbed the “grey belt” in England’s greenbelt. Combined, these sites could produce 100,000-200,000 new family homes, depending on the density of the developments. Although this is far below the number of new houses needed to satisfy demand, “what is unique to the grey belt is that it is suited to family homes, for which there is great need”, points out Anna Ward. “A mature and more objective approach to green belt development is essential to boost housing delivery,” she adds.
Of the 11,205 sites identified, just over 40% sit within the London green belt area. Merseyside and the Greater Manchester green belt area offered the second highest number of available sites (1,068), followed by green belt areas in Birmingham (1,351), South and West Yorkshire (1,129 sites) and Bristol and Bath (606). These sites, totalling 13,500 hectares, do not include agricultural or residential uses and have a combined built footprint of approximately 10 million square metres.
Need to Know
Grants – Productivity scheme now open
The latest round of the Improving Farm Productivity grant, half of which is earmarked for farm-based solar schemes, is now open for applications. Grants of £15,000-£100,000 will cover 25% of the cost of installing a range of solar equipment including panels, batteries and contributions towards grid connections and upgrades. Grants of £25,000 to £500,000 will also cover half the cost of innovative robotic and automated equipment. The scheme is competitive so do contact our grants guru Henry Clemons for the best chance of making a successful claim.
Vat – Relief for energy saving kit
Talking of renewables, the government has confirmed that from the beginning of next month (February 1) there will be a zero-rate of VAT when installing energy-saving materials. The list of qualifying items qualifying for relief now includes electrical battery storage, water source heat pumps and smart diverters.
Rents – Defra figures show drop
Long-term agricultural rents in England have fallen, according to the latest Defra data. The average annual rent for Agricultural Holdings Act tenancy agreements in 2022/23 decreased by 7% to £165 per hectare (£67/acre) – a ten-year low. Of the different farm types, LFA grazing units saw the largest fall, decreasing by 27% to £52 per hectare (£21/acre). Farm Business Tenancy (FBT) agreements rose marginally to £228 per hectare (£92/acre), a 1% increase. Seasonal agreements fell by 13% to £158 per hectare (£64/acre). Please contact Alastair Paul for advice on creating innovative farming arrangements that benefit both parties.
Tenancy reform – Consultation closing soon
Estate owners and rural businesses wishing to contribute to Defra’s Call for Evidence that is seeking industry views on the extent of poor practice in the tenanted sector have just a few days to complete the CLA’s survey, which closes on 31 January. Launched in response to the Rock Review, the Call for Evidence is also seeking views on ways to encourage more collaborative tenant-landlord and advisor relationships and the potential appointment of a Tenant Farming Commissioner.
On the market
Exmoor – More acres available
If you’re looking for some natural capital potential in the south-west of England, picturesque Emmetts Grange could fit the bill. It includes 748 acres of pastureland and moorland on Exmoor, near Simonsbath, and offers significant environmental opportunities alongside traditional farming. The land is available as a whole or in five lots ranging from 37 acres of pasture to 256 acres of moorland. The overall guide price is £3.5 million. Contact Alice Keith for more details.
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.
Main Photo by Jasper Garratt on Unsplash