A collapse in the rural property market following several farming crises has been averted by an influx of urban residents to the countryside.
In the Farmland Price Survey, rural members of the Royal Institution of Chartered Surveyors (RICS) have reported 44% of farm buyers over the past year were non-farmers. This figure rose to 56% for the South East.
RICS has noticed a trend of incomers to buy small or medium sized farms with an intention of living in the house but not farming the land, which is then offered on a rental basis to a neighbouring farmer.
Financing such deals can be a complex operation. Matt Russell, product development and sales support manager at lender, The Mortgage Business, pointed out land usage covenants can make funding difficult.
He said: ‘Lenders would usually count over a certain number of acres attached under title to a property as a commercial proposition. The reason is that there would normally be some sort of usage restrictions on both the house and land.
‘The alternative is the land could be held under a separate title with the house and immediate land under another. This allows separate mortgages and charges under each title, making life easier. However, most residential lenders would not lend on an area over about 10 acres.’
Chris Fleetwood, director at broker Paradigm Consulting, added: ‘These deals can be complex. If the land and house has no restrictive covenants, then a residential lender would be first call, but there can be valuation issues on the house once you strip away land as a separate loan.’
The price of farmland over the 12 months to June averaged £7,484 per hectare, basically unchanged from the previous 12 months.
Julian Sayers, rural spokesman at RICS, said: ‘The collapse in the rural market in the wake of foot and mouth, and uncertainty over the common agricultural policy mid-term review, has not happened. Such predictions failed to take account of the potential of other rural purchasers to bolster activity, such as residential buyers.’
