Covid 19 – Rural property and business update

Commodity prices

While beef values remain stable, despite the closure of all McDonalds outlets, the price of lambs sold at auction markets tumbled this week by as much as 60p/kg, according to AHDB. Demand has slumped in France with open air markets now closed and the usual Easter restaurant trade across the UK and the rest of Europe set to be kyboshed by the social distancing lockdown. Due to reporting disparities, the slide is yet to be reflected in the deadweight price below.

Anybody trying to get their hands on some pasta at the moment will know that Covid-19-inspired panic buying is putting immense strain on the food supply chain. This has helped to push up wheat prices, despite a climb in the value of sterling against the dollar and euro acting as a break on the competitiveness of UK grain on the world market. For those looking to sell forward, November feed wheat prices rose to £176/t.

The farmland market

As reported a week ago, Covid-19 had already brought the market for farms and estates in England to a virtual standstill.

Given the further movement restrictions announced on Thursday (26 March) that halt is now pretty much absolute as conducting viewings and valuations is off limits, given the restrictions on non-essential movements.

Deals in the pipeline can proceed, but social-distancing and stay-at-home guidance mean the government is now encouraging completions on property with a residential element to be delayed until after the measures are relaxed.  

But desktop market appraisals are still being done by my colleagues, and farms could come to the market very quickly once movement restrictions are eased.

Some vendors would definitely like to adopt the “early-bird-catches-the-worm” approach, points out   my colleague Clive Hopkins, Head of Farm and Estate sales.

We may yet see some semblance of an early summer market, but perhaps more likely is that the traditional selling season shifts into the traditional holiday months of July and August.

There is certainly a good supply of farms and estates in the pipeline. Clive says he had been expecting his busiest spring in three years with less Brexit and political uncertainty holding back decision-making by vendors. 

In Scotland, the spring selling season, which due to the climate starts a bit later than south of the border, never even had a chance to get going.

Frustratingly, says my colleague Tom Stewart-Moore, Head of Scottish Farm Sales, as in England a fair number of properties were all set to be launched.

Tom expects the entire selling season to be delayed until late summer/autumn.  Although demand remains strong, this could see farmland values come under a bit of short-term pressure if a lot of farms do come onto the market during the final half of the year, he notes.

Unsurprisingly, the remoteness of much of Scotland means those contemplating a more isolated life to protect themselves from future pandemics, or just to get away from it all, are starting to cast their eye northwards.

A fellow guest at the final event I attended before the crisis took hold, asked if we could help him find a Highlands’ bolthole, while Tom reports extra interest this week in the 1,200-acre Moll Estate on the Isle of Skye (pictured). 

For more on Scottish farmland values checkout the latest edition of our Scottish Farmland Index

https://www.knightfrank.com/research/scottish-farmland-index-h2-2019-6999.aspx

Staff issues

The public has responded with apparent alacrity to the call last week for more people to work on farms facing seasonal labour shortages due to Covid-19. Farmers Weekly reports that agricultural employment agencies have been inundated with applications.

Financial support

Following the earlier support measures announced for salaried employees, Chancellor Rishi Sunak has unveiled an income-support scheme for the self-employed that could help some struggling rural workers. Payments will not kick in until June and do not cover everybody.  

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Statutory Residence Test

UHNWIs who visit the UK regularly but are not resident for tax purposes have to be careful how many days they spend in the country to avoid incurring a tax liability. Due to Covid-19 HMRC has listed four circumstances where an exception could be granted (with thanks to Boodle Hatfield).

1. Are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus;

2. Find yourself advised by official Government advice not to travel from the UK as a result of the virus;

3. Are unable to leave the UK as a result of the closure of international borders

4. Are asked by your employer to return to the UK temporarily as a result of the virus.

These exceptions still leave some grey areas such as caring for a sick relative or the unavailability of a commercial flight.

Conditional exemptions for heritage properties

HMRC has confirmed that those properties that have to open to the public to secure conditional exemption from inheritance tax will not be in breach of their obligations if they can’t allow public access due to the Covid-19 restrictions. Somewhat obvious you might think, but it’s good to have it in writing!