Property
Irish land prices among highest in world; Noonan tax cut boosts Dublin prices
By Michael Hennigan, Finfacts founder and editor
May 29, 2015 - 8:52 AM

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Irish land prices remain among the highest in the world and with County Dublin posting the biggest price jump in 2014, the October 2014 Budget cut of the post-economic bust 80% windfall rate on profits from rezoned land to the standard capital gains charge of 33% was a gift by Michael Noonan, finance minister, to speculators who are back in the market.

Mark Twain (1835-1910), the American writer, once said, “Buy land, they’re not making it any more” and in recent times commodity booms, historical low interest rates and a forecast from the Economist that humans will need to produce more food in the coming 40 years than they did in the previous 10,000 put together, are boosting prices across the globe.

According to Savills, the UK estate agents, its farmland index shows that there has been an average global annualised growth in land values since 2002 of 20%.

Savills also reported that in UK farmland has produced big returns during the past decade. The price of prime arable land, mainly in eastern England, especially East Anglia, rose almost fourfold, by 277% in the ten years to 2014 compared with a gain of 41% in the decade from 1994-2004.

The price of UK land without a residential house, rose 15% to an average of £8,000 an acre, according to the 2014 farmland index published by Knight Frank.

The Financial Times says these price rises beat other assets, including prime London property, up 127% during the past decade, the FTSE All-Share index and even gold.

A study published in Environmental Research Letters in 2014 reported that at least 126 countries are involved in purchasing or selling global farmland. The most active buyers are investors in the United States, China, UK, Germany, India, and the Netherlands. They're typically seeking to invest in land in South America, Africa, and Asia — particularly Brazil, Ethiopia, Philippines, Sudan, Madagascar, Mozambique, and Tanzania.

Last month ANZ New Zealand, New Zealand’s largest financial services group, said that of the 12 countries, based on consistency and reliability of data, it analysed, "New Zealand’s annual gain of 13.6% since 2000 was the highest. The catch was New Zealand’s land prices were the second most volatile after Ireland over this period."

ANZ said: "The Netherlands was the most expensive place to buy farmland, with prices averaging US$48,000/ha (hectare) since 2000. Ireland was next (US$28,600/ha), then Denmark (US$25,200/ha), Italy (US$19,400/ha), the UK (US$19,200/ha), Germany (US$12,400/ha) and Spain (US$12,100/ha). The average for New Zealand over this period was US$8,150/ha. The picture changes a bit when we focus on the past three years (the average for New Zealand was US$11,100/ha) and changes still more when we eye current prices, which have been close to US$15,000/ ha. This implies we may have well passed Germany and Spain in recent times."

The Netherlands is the world's second biggest agri-foods exporter after the US.

Ireland

Only 1.5% of the land in ownership in the Netherlands changes hands annually but the rate has been as low as 0.2% of utilised land in Ireland — where there are a lot of small holdings supported by cash from the EU's Common Agricultural Policy.

The end of EU dairy milk production quotas this year will underpin Irish land prices while speculation will do so in County Dublin.

An annual survey by the Irish Farmer's Journal newspaper found that the average price of land in Co Dublin surged by almost 50% to €23,496 per acre (2.47 acres in a hectare) in 2014. While Dublin had the highest average price in the State, the highest percentage price rise was in Wicklow, where prices jumped by 56.3%.

Overall more than 86,000 acres were put on the market in 2014, up 15.4% on 2013 and the average price increased by 5.2% to reach €9,890 per acre,€24,230 per hectare and US$31,160 (average 2014 USD/EUR rate).

The Irish Times says that the report editor Lorcan Allen said that some huge prices were paid for agricultural land on the outskirts of towns and villages that may have future development potential. He highlighted one tillage farm in Dublin that was valued by an auctioneer at €20,000 per acre but ended up selling for almost €50,000 per acre.

“Even if the investor has no intention of developing the land themselves, they may view the investment as a safe haven to park money, especially when the property is located so close to an urban centre,” he said.

This week, a Society of Chartered Surveyors Ireland (SCSI)/ Teagasc report showed that price growth was strongest in Dublin, increasing by as much as 26%; more modest price growth in Rest of Leinster and Munster, increasing by no more than 7% while prices in Connaught/Ulster declined by as much as 19%. Meanwhile, rental prices for tillage land also increased with the strongest increases, by between 12% and 18%,again being recorded in Munster.

"One of the consequences of the low volume of land sales is that farmers have to make use of the land rental market if they wish to change the area of land they farm. Renting out land is a means by which the title to the land can be retained but an income can be derived from the land by the owner if he or she is not in a position to farm the land...The dominant form of land rental contract in Ireland over the last 200 to 300 years has been the conacre system of 11 month rental agreements."

In 2014 the Financial Times ranked Irish agricultural land as the most expensive in the world — this is not welcome news for a food producer and we explain here how the European Union's Common Agricultural Policy reduced Irish land transactions to a very low level making land prices four times the level in France.

Dysfunctional development land systems in UK and Ireland - Part 1 & 2

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AUGUST 2015: Irish Farmers & Milk Prices: 'Shackles' off in April; Demanding safety-net in August

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