Substantial fall in arable land prices no cause for concern

De price of arable land fell by €21.861 per hectare to €52.123 per hectare between May and June, according to new data from the Land Registry. This extremely sharp price drop ensures that the average price is almost at the lowest level of the past 10 years. It sounds worrying, but a call to various agricultural brokers shows that this price must be seen in perspective. 

Fewer transactions in the summer
According to the brokers, it is important to keep in mind that the number of transactions in the summer months is usually relatively low and the corona crisis also affects the number of transactions. It means that the average price for arable land registered by the Land Registry is influenced by the slightest. "I cannot directly explain the price drop and I have not heard of any special transactions. I therefore expect that there were 1 or perhaps 2 transactions in the month of June that pushed the average down," explains Johan Zandbergen, broker at VSO Makelaars, to. 

Secondly, according to him, it is quite possible that there have been fewer transactions in relatively expensive areas (including Flevoland) than in cheaper regions (such as the Northern pasture area). Hans Peters, chairman of the Rural & Agricultural Real Estate section at VBO Makelaar, also endorses this. "The prices for arable land are always determined very regionally. So there is indeed a chance that business has been done for a lower price in a certain region or that more land has been traded in a cheaper area, causing the national average price in this quiet period records a decline."

A possible third reason for the price drop in the Land Registry data is that a leasehold or lease transaction was accidentally included. That price is currently between €50.000 and €60.000 per hectare, which corresponds to the average price recorded by the Land Registry for arable land. 

Summer fluctuations not uncommon
When we take a look at the national figures from the Land Registry for the past 5 years, we see that these types of major fluctuations are not necessarily surprising at this time of year. It can be seen that the price for arable land increased by as much as €2017 per hectare to €30.000 per hectare between the months of June and August in 93.467, before returning to €60.789 per hectare in September. 

A similar picture is visible in the summer of 2018: from €61.637 per hectare in July to €82.610 per hectare in August. The price of arable land then fell again in September to €52.490 per hectare. This does not only apply to the prices of arable land, because the prices of grassland also show greater fluctuations in the summer. Something that, according to the brokers, is related to the fact that fewer transactions take place during that period.

No downward trend expected
Both Peters and Zandbergen do not expect the price drop to continue in the coming months. "I have not received any signals that a decrease in the price of arable land is in the offing. I must say that a price increase does not have to be taken into account," Zandbergen describes.

According to the brokers, the fact that a price increase is not obvious is partly due to the fact that the banks are still strict in providing financing. There is also currently little room for arable farmers to invest, for example because the price of potatoes is under some pressure. "Farmers would rather hold on to their arable land than sell it for a low price," most brokers conclude.