UK rural property: Plan for the future

Opinion

It was slightly worrying to see the results of a survey by the AHDB that revealed almost half of the respondents hadn’t put in place any measures to replace the loss of income from the Basic Payment Scheme (BPS) which is being tapered before being scrapped in 2027. Given that, according to Defra’s latest figures, BPS contributed £3 billion to the UK’s Total Income from Farming (TIFF) of £7.9 billion last year, the loss is not something to be sniffed at. The government’s new environmental schemes will replace a good chunk of that income at an aggregate level, but there is no guarantee that individual farmers will be able to make up the loss by going greener. Planning for the future needs to start soon AS

Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here

Andrew Shirley Head of Rural Research; Mark Topliff, Rural Research Associate

In this week's update:

• Commodity markets – Mixed wheat messages
• ELMs – Unknown tax implications a barrier to scheme uptake
• EU – Environmental law gridlocked
• International news – Can “agri-hoods” link rural and urban communities?
• New builds – Scotland set to ban gas boilers
• Pollution – Environment Agency double inspection visits
• Yorkshire opportunity – Barns with a view
• House prices – Country homes take a dip
• Farmland Index – Prices rise in quarter 1
• The Wealth Report – 2023 edition out now
• Farmland Index – Agri-land 2022's top-performing asset

Mixed wheat messages

There have been mixed signals regarding wheat markets. The latest USDA World Agricultural Supply and Demand Estimates (WASDE) put production up 12 million tonnes on last season to 800 million tonnes.

However, several analysts have downgraded their EU estimates. Vladimir Putin has also started to muse about not renewing the Black Sea grain deal that expires on 17th July. Traders responded bullishly pushing up spot and future prices. £200/t is now available for November delivery on the futures market. Meanwhile, the recent slide in lamb prices should run out of steam at the end of the month when the festival of Eid pumps up demand AS

Talking points

ELMs – Unknown tax implications a barrier to scheme uptake

Uncertainty around the tax implications and legal requirements of participation were two of the barriers land managers cited as preventing them from entering a Defra-funded Landscape Recovery (LR) project, according to an AHDB study. Participants in the report also said that potential conflict with other project partners, perceived bureaucracy, high costs and the scheme's complexity put them off considering involvement in LR.

However, those that had succeeded on to an LR project said that they saw the scheme as a way to generate new income, had a strong interest in environmental schemes and saw benefits for wildlife.

When it came to attitudes to the phasing out of the Basic Payment Scheme (BPS), unsurprisingly, the participants said it would significantly impact their businesses. But interestingly, over half had already made changes to counter falling income. The most common changes included diversification, reducing costs, improving efficiency and seeking revenue from environmental services. Looking forward, it was much of the same, but driving efficiency proved most popular, such as keeping less livestock, reducing staff, better-performing animals and changing to low-input farming. Only time will tell whether these attitudes to the policy changes will eventually lead to a more resilient farming sector MT

EU – Environmental law gridlocked

MPs in the European Parliament failed to win a vote last week implementing new environmental measures, despite pleas from 50 of the EU’s largest companies to take more action to protect the environment. According to The Guardian, the EU’s flagship environment law to restore biodiversity on land and rivers is hanging by a thread after a rebellion mounted by a centre-right group of MEPs failed to block the proposed legislation from going to the next stage in the parliamentary process. In a dead heat, 44 MEPs voted in favour and 44 against the nature restoration law that was proposed last year as a fundamental part of the EU’s green deal. It aims to reverse the dramatic decline in nature by making restoration and rewilding of degraded land and waters including seas and seashores mandatory AS

International news – Can “agri-hoods” link rural and urban communities?

A farm surrounded by a community that can access its garden and vegetable plots and sell produce through a farmer's market – it sounds like a hippy commune, but the reality is quite different. Indigo will be a modern residential and commercial development that is anchored by a 42-acre working farm, reports Modernfarmer.com. This so-called agri-hood is an initiative led by two Texan farmers with a goal to have 750 residential homes, commercial and public areas, and even a lake – all centred around the farm. They plan to build two and three-story homes rather than typical big American lots, so they can condense everyone into a smaller area, and residents can walk to everything they need. It also means there will be plenty of space reserved for wildlife habitat and agriculture. The grand opening is scheduled for early 2024 MT

Need to know

New builds – Scotland set to ban gas boilers

All new buildings will need to be fitted with heat pumps or connected to low-carbon district heating networks under proposals being consulted on by the Scottish Government. Of particular interest to landowners is that the plan also includes the conversion of existing buildings. Ministers have set out amendments to new building regulations that will mean gas and other fossil-fuel-powered boilers would be banned from April 2024. This would apply to both new domestic and non-domestic buildings.

Homes and buildings, along with transport, are the biggest contributors to carbon emissions. Scotland's Minister for Zero-Carbon Buildings, Patrick Harvie, said the change will be "essential" to Scotland's ability to meet its 2045 net-zero carbon target MT

Pollution – Environment Agency double inspection visits

Farmers that pollute rivers should watch out – the Environment Agency (EA) is upping its game. Their chairman, Alan Lovell, speaking at an event in London, said that the agency had carried out 4,000 farm inspections in 2022-23, double that of the previous year. Most of those visits were in target areas where there are known problems. The number of prosecutions is likely to also increase. Lovell said: "There were only six prosecutions in the agricultural sector in 2021-22." Currently, the EA has 140 investigations ongoing, and some of them would result in prosecutions. Just in the last week, a £510,000 fine was issued to OMEX Agriculture for spilling liquid fertiliser into a Lincolnshire river in 2018, killing 135,000 fish MT

On the market

Yorkshire opportunity – Barns with a view

Our new Yorkshire office is selling a development project at Newby Cote, Clapham, North Yorkshire. The three barns with stunning views towards Keasden Moor and the Forest of Bowland AONB have planning consent for four semi-detached homes and one detached house. The guide price is offers over £700,000 AS

Contact Hannah Renwick for more information 

Knight Frank Research

House prices – Country homes take a dip

The average value of country houses fell by 0.5% in the first quarter of the year as the cost of borrowing continued to rise, according to the latest findings from the Knight Frank Prime Country House Index. On an annual basis prices have dropped by 0.8%. Demand remains strong, but transaction numbers fell in the aftermath of Liz Truss's mini budget last autumn. "Ultimately, despite resilient demand, we expect the reduction in spending power caused by the increase in the cost of borrowing and improved supply to see prime regional prices decline by a few percentage points in 2023," predicts my colleague, Chris Druce.

Farmland Index – Prices rise in quarter 1

Agricultural land proved resilient in the first three months of 2023. While residential property values weakened, the average price of bare farmland rose by 2%, edging closer to £9,000/acre, according to the Knight Frank Farmland Index. The hike takes the annual rise to 11%, reinforcing farmland's reputation as a good hedge against inflation. Read the full report for more data and insight

You can also listen to the latest edition of our Intelligence Talks podcast where I discuss biodiversity net gain and nutrient neutrality schemes with my Rural Consultancy colleague Isabel Swift AS

The Wealth Report – 2023 edition is out now

Knight Frank's leading piece of thought leadership on property and wealth trends was launched recently and includes an interview by me with one of Scotland's pioneering rewilders, as well as some thoughts on why farmland could be one of this year's most in-demand property investments. Download your copy to find out more AS

Photo by Tim Matras on Unsplash