UK rural property: What cost biodiversity?

Opinion

Replacing any nature that you happen to destroy has to be a good thing and the biodiversity net gain scheme (BNG) is generally considered to be a step in the right direction, especially now that HMRC has confirmed that rural property owners supplying BNG credits won’t lose valuable tax-planning reliefs. However, some smaller property developers that I have spoken to are concerned that the extension of the regulations to smaller sites this week could make their businesses, already under pressure, financially unviable. The planning process is already arduous enough for those who can’t afford to employ their own team so I hope that policymakers and local planning departments are ready to provide the necessary resources for smaller housebuilders, many of which are family businesses providing high-quality rural accommodation. In the meantime, I hope you have a great Easter break.

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:

• Commodities – Volatility rules
• BNG – Small sites now included
• HS2 north – Gone but not forgotten?
• Land use – UK strategy still expected
• Save our magazines – Consultation closing soon
• Next gen – Conference calling
• New launch – Easter treat in Warwickshire
• New Zealand – Sporting dairy farm for sale
• The Wealth Report – Out now
• Development land – Market stabilises.
• Farmland prices – 2023 ends on a high
• Country houses – 2023 better than expected
• The Rural Report – Watch the videos

Commodity markets

Volatility rules
Due to the Easter bank holiday and a trip to the pistes there is no commodity price update this week, but grain and oilseed markets have been in a febrile mood with wheat prices spiking following news that the largest private Russian grain exporter was in dispute with the Russian authorities. As reported by trader Frontier: “Speculators holding near record short positions in agricultural markets panicked and bought back some of their short books, sharply driving futures prices higher in the process, with some thinking that there could be a notable move to source alternative wheat supplies from the EU and US. Fears of heightened conflict between Russia and Ukraine, following increased Russian attacks on the port Odesa and uncertainty over repercussions following the Moscow killings last weekend, added weight to the buying.” Prices dropped back sharply when “it became apparent that the Black Sea export pace had not been interrupted, with analysts having seen Russia ship five million tonnes of wheat during the month.” Speculation activity has also helped to push up oilseed rape prices, along with rising crude oil values.”

Need to Know

BNG – Small sites now included
As of April 2nd smaller residential and commercial development sites will fall within the orbit of the biodiversity net gain (BNG) scheme. This means any biodiversity loss during the development will have to be replaced either onsite or at a separate location. Developers will also be able to buy BNG credits from third-party suppliers. For more information please read our handy BNG guide, which has been updated to reflect the extension to smaller developments.

HS2 north – Gone but not forgotten?
Tim Broomhead of our Compulsory Purchase and Compensation team reports the arrival of an interesting letter from HS2 Ltd. Although Prime Minister Rishi Sunak officially scrapped the northern leg of HS2 last October, sections of it around Manchester could be revived as part of the Northern Powerhouse Rail project. The letter states: “On Monday (March 25th), the Secretary of State for Transport laid a Written Ministerial Statement in Parliament recognising the consensus reached with local leaders in the north of England regarding the NPR route into Manchester and the need to serve both Warrington and Manchester Airport via stations. The Secretary of State for Transport also confirmed that he would therefore continue to promote the High Speed Rail (Crewe – Manchester) Bill, with the intention of seeking the agreement of Parliament to adapt the Bill. This adaptation will involve removing the elements of the Bill which applied to HS2 only and continuing to promote the elements which apply to Northern Powerhouse Rail.” Tim says: “It looks like some property owners in the northwest who were going to be affected by HS2 still need to be ready for Northern Powerhouse Rail”.

Talking points

Land use – UK strategy still expected
Regular readers of the Rural Update will know that I’m an advocate for a joined-up approach to rural policymaking. The government’s promised Land Use Framework document, due last year, was therefore hotly anticipated. However, it was delayed due to a change in leadership at Defra. The word on the street is that it will finally be released this summer and will adopt a light touch approach, rather than being too prescriptive, with a focus on land sharing not land sparing. This will upset some within the farming industry who worry that trying to deliver for the environment and produce food on the same bit of land will impact the UK’s sell sufficiency.

Save our magazines – Consultation closing soon
If you subscribe to any weekly magazine it’s probably pot luck as to when it will arrive. Most are supposed to slide through letter boxes by Saturday, but my copies of Farmers Weekly and The Economist rarely show their heads before Monday these days. This tardiness is particularly galling for those of us who live in rural areas some distance from a newsagent. The situation could get worse if the government accepts Royal Mail’s request to get rid of next-day Saturday deliveries altogether. I hope you value my digital updates, but the loss of timely hardcopy magazines that can be browsed in any location at your leisure would be a real shame. You can respond to OFCOM’s consultation here, but it closes on April 3rd.

Out and about

Next gen – Conference calling
If you’re a next-gen land manager or rural entrepreneur you’ll want to attend the CLA Next Generation Conference at Crumplebury on the Whitbourne Estate near Worcester. The event on May 1st and 2nd, sponsored by Knight Frank, will help provide guidance for those who have recently taken over the family business or will do so shortly. 

Property News

New launch – Easter treat in Warwickshire 

Our Farms & Estates team has just launched Cutlers Farm near Henley-in-Arden. The 327-acre mixed farm, on the market for the first time in 60 years, includes a period family home with extensive secondary accommodation and income producing commercial property. The guide price is £6.5m. Please contact Alice Keith for more information. 

New Zealand – Sporting dairy farm for sale

To celebrate 25 years of selling farms in New Zealand Knight Frank’s Kiwi partner Bayleys has just published a special edition of its Country magazine featuring 88 rural opportunities for sale. These include 433-hectare Braeside Dairies in the Manawatū district, home to 1,450 cows and arguably the country’s best dairy unit. Owned by the Whitelock family, which has provided a number of players for the All Blacks rugby team, it shows the power of the “White Stuff”. The closing date for tenders is May 29th.

Our Latest Property Research

The Wealth Report – Out now 

The 2024 edition of The Wealth Report, Knight Frank’s leading piece of thought leadership on global wealth and property trends is out now. This instalment of the report includes the latest wealth creation data – spoiler, there are more rich people – and an article by yours truly on global farmland markets and how they are being influenced by ESG and Natural Capital. Download your copy. 

Development land – Market stabilises. 
Newly released figures from the Knight Frank Residential Land Index show that England greenfield and urban brownfield values were flat in Q4 2023 compared with the previous quarter. Previously, urban brownfield values had fallen by 20% since the most recent peak of the market in the first quarter of 2022 up to Q3 last year, with greenfield down 17% during the same period. Greater economic confidence and a slowdown in the rise of build costs helped underpin values, says my colleague Anna Ward. Read her full report for more numbers and insight.

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.

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.