Farming News - Covid-19 – Rural property & Business update
Covid-19 – Rural property & Business update
The following is a brief round-up of some of the Covid-19 related issues affecting rural property owners and businesses from Knight Frank.
As of Friday 20 March, there had been no big shifts in agricultural commodity prices.
But strong demand for meat from those looking to safeguard their own supplies over the coming weeks of uncertainty has pushed up values, particularly for lamb, somewhat.
At a retail level, consumers preparing to self-isolate or concerned about future availability have boosted demand, while panic buying of lambs at livestock markets by French traders worried that cross-border traffic with the UK could be shut down has supported prices, already significantly higher year-on-year.
The weakness of sterling against the euro has also made UK prices more competitive. However, any gains would quickly be reversed if there was a ban on exports to the continent, which account for a significant proportion of UK lamb sales.
Wheat markets are up on the back of the drop in the value of the pound. By contrast, the sharp drop in crude oil prices is putting downward pressure on oilseed markets. Diesel prices – one of the biggest costs for arable farmers - are also easing, but not as sharply as for crude oil
The farmland market
The market for agricultural land, already very thin due to Brexit concerns, looks set to retrench further in the coming months. According to Farmers Weekly, the volume of land advertised for sale so far this year has dropped by almost 40%, albeit from a very low base – only 3,600 acres had been launched in the magazine by this point in 2019.
With the arrival of spring, now would usually be a peak time for the launch of new properties, but the impact of social distancing restrictions means residentially led sales will likely be put on hold. Blocks of bare land could still be launched to take advantage of the lack of competition.
Deals already in the pipeline have exchanged this week, but other potential buyers whose businesses have been hit by the virus outbreak are more cautious about proceeding.
With such a low level of sales activity it is hard to gauge any impact on land values, but if the crisis does prompt a move towards safe-haven assets farmland could benefit. Values rose around 20% in the three years following the 2008 financial crisis. However, at this point I still feel the outcome of the Brexit trade negotiations is probably the major factor that will influence short-term to medium-term sentiment. It will be interesting to see what, if any, effect the Covid outbreak has on these negotiations.
Movement restrictions mean businesses, such as soft fruit growers, that rely heavily on seasonal European labour are increasingly worried about how they will harvest and pack their crops. It is worth noting that those involved in the food industry are considered key workers and will be able to continue sending their children to school.
A number of the support measures announced by the government could help rural businesses. While the core agricultural operations on farms and estates may not require assistance, the measures, which include paying “furloughed staff” 80% of their salaries, rates holidays and help for renters, could well benefit any diversification schemes and help business or residential tenants who could be struggling to pay their rent.
As ever, there will be some areas that may not be covered by the measures and as the systems are being built from scratch not all the details are known yet.
The shooting season, for example, does not begin until 1 September, but the work for keepers and their teams starts now so they cannot be “furloughed”. However, if advance bookings for shoot days are down because guns fear the current movement restrictions will not have been lifted by then, this could create cash flow problems and issues paying salaries.
The Coronavirus Business Interruption Loan Scheme, which is interest free for the first 12 months, could help. There is also small business grant funding of £10,000 for all businesses in receipt of small business rates relief or rural rates relief and grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000.
Landlord safety checks
The advice from the Health and Safety Executive (HSE) is that agents and landlords should use their best efforts to deliver safety checking and emergency repair obligations during the outbreak of the Coronavirus and should document all communication with tenants if they are unable to do so due to the virus.
If an agent or landlord anticipates difficulties in gaining access as the Coronavirus situation progresses, they have the flexibility to carry out annual gas safety checks two months before the deadline date. Landlords can have the annual gas safety checks at their properties carried out any time from 10 to 12 calendar months after the previous check and still retain the original deadline date as if the check had been carried out exactly 12 months after the previous check.
Please note: This update is intended as guidance only and professional advice should be taken by those affected by the Covid-19 outbreak.