Interest rates will rise sharply in 2022, which will put pressure on the borrowing capacity of agricultural entrepreneurs. At the same time, many dairy farmers and arable farmers have money in their pocket due to the sharply increased yield prices this year. An interesting combination to see how land prices respond to this. Boerenbusiness gauges among brokers how the agricultural land trade is doing in the different wind directions of the Netherlands.
For a while the land market seemed to be recovering, but in the third quarter prices unexpectedly caught up. The average price of grassland increased by 5,5% in the third quarter of this year to €67.100 per hectare. That is more than 6% more than the average price of grassland for the whole of 2021. Arable land prices passed the €80.000 mark again in the third quarter, after falling below this in the previous quarters. It can be said that land prices in our country are picking up again, although considerably fewer hectares were traded in the third quarter than the same period last year. The number of hectares sold fell by 15% to 5.000 hectares, according to figures from the Land Registry.
From the income estimate from CBS and Wageningen Economic Research (WUR), which were published this week, show that dairy farmers raked in more than a tonne for the first time in history. Arable farmers also generally farmed well with an average of €133.000. This means that on paper there is financial scope to invest.
'Then just a bit too expensive land'
The effect of the increased income in the land-based sectors is visible. Land prices are rising again, sees agricultural broker Frans Merkens of Berk&Kerkhof from Best. "Both here in Brabant and in Gelderland. There is a lot of demand for agricultural land. Not only farmers are buyers, but also private individuals, investors and governments." Prices vary widely, Merkens knows. "Payments start from €70.000 per hectare for poor grassland. For good soil this rises to €120.000, where the location and conditions are of great importance." Many dairy farmers and arable farmers are inclined to invest in land this year, because investing in buildings is seen as risky. This is due to the uncertainty regarding nitrogen. "Land has traditionally been a safe investment. Sometimes the current thinking is to buy slightly overpriced land instead of paying taxes." According to Merkens, the effect of the rapidly rising interest rate is quite limited. "We see that entrepreneurs often also invest from their own resources, with most transactions starting from 5 hectares."
Jouke Havinga (Havinga Makelaardij)
Top in North Holland seems to have been reached
Agriteam Noord-Holland sees that there is a lot of demand for land, but rising interest rates do have an impact. The top has probably now been reached in this relatively expensive province, think brokers George van der Velden and Joep Dekker from this agency. Prices also vary widely in North Holland, from €65.000 for pasture land to €130.000 for heavy clay soil, suitable for bulb cultivation. The effect of high milk prices is limited in North Holland. "Arable farmers, flower bulb growers and investors keep the land price up here, livestock farmers do not make the market." The brokers do note that livestock farmers from all over the Netherlands are increasingly orientating themselves towards North Holland, often because they have been bought elsewhere. "We just happen to have one beautiful object on offer, a modern dairy farm with 75 hectares of land. There is a lot of interest in this." The real estate agents leave the asking price open. "Assume that this is the top of the market." The turnaround time for these types of objects, with an NB permit, is relatively fast. "We expect to sell this business within three to six months.”
Cocktail of price-increasing factors
Jouke Havinga of Havinga Makelaardij from Briltil in Groningen also notes a great need for land. Dairy farmers often 'have to', due to extensification and the expiry of the derogation in the coming years. "But not only the agricultural sector is looking for land, also think of entrepreneurs with solar fields, nature and infrastructure." Provinces sometimes have to buy up thousands of hectares to implement the Netherlands Nature Network (NNN), a network of existing and new nature reserves. Although rising interest rates have a certain dampening effect, the price-increasing factors weigh more heavily, according to the experienced real estate agent who is active throughout the Netherlands. Havinga does not want to venture into concrete amounts, because they vary widely. "The location and soil type determine the price. Fertile arable plots are simply scarce in our country." According to Havinga, the Land Registry prices are not entirely representative, because, among other things, plot exchange is not included.
Despite the structural scarcity, the land market always offers opportunities, including for business relocations, according to Havinga. One condition is that the entrepreneur in question enters the market assertively. "If you really want something, there are beautiful companies for sale here on the clay soils in Groningen, but also in Friesland and Zeeland." According to Havinga, you should not expect this from the national government, which is mainly busy implementing its own 'dash course'. The broker is concerned that there is no clarity on many major policy files, such as nitrogen and the new CAP. At the same time, the grass is not greener on the other side, says Havinga. "In Germany, Denmark and a country like New Zealand, drastic measures regarding nitrogen and the environment are also planned in the coming years, which will significantly affect the land market there."