As we look forward to a new year, there are a lot of unanswered questions and areas of intrigue. This year seems to be a crucial year in our nation’s life, as this election could have a significant impact on the health of our nation. Putting politics aside, this year will also play a significant role when it comes to land acquisition.
While the housing and land markets have all made some form of recovery since 2008, it hasn’t been a consistent recovery around the nation. Certain geographic markets have performed vastly better than others while the type of markets have also seen different recovery. New construction has typically fared worse existing inventory. However, the focus today is on purchasing land in 2016 and the trends that are expected.
Farmland could have a crucial 2016. As it currently stands, many farmers are paying extremely high cash rents. According to a recent survey, many farmers are willing to abandon the high cash rents. With that being said, they won’t abandon the farm in 2016. The vast majority expect the cash rents to decrease within the next couple of years. Whether that is truly optimism or actually hope is yet to be seen. A lot of the farmers understand that a short-term loss outweighs the benefit of the long-term success. This is a large factor that keeps them paying the high cash rents. In that same study, a strong 40% of respondents said they will in fact, walk away if the rates are not lowered in 2016. This could shape out as a significant trend in 2016 depending on which was the cash rates go.
Another trend to look for in farmland is the selling and purchasing of higher-quality ground. Bargain lands are no longer at the top of the wish list for buyers. Instead most buyers are looking for quality land. This will create an increase the demand for value in the immediate future and longer term future.
Small farming is also becoming a rising trend, year after year. More and more non-farmers are getting swept up in a consumer craze towards “urban farming” meaning smaller land plots are being sold to a traditionally more residential market.
One trend of 2016 might be stalemates. By this we mean that the actual purchasing of land might be a longer process than anticipated. Professional land sellers understand the market we are in and will fare better because of their knowledge of the market. However, sellers looking to part ways with their land still have a very 2006-2007 mindset. This means that they are looking for pre-recession money for their land, but they simply aren’t going to get it.
On the other hand, buyers are looking for deals. The assumption amongst many buyers is that they should still be bargain shopping for land to develop. Mix that with the pre-recession mindset of the sellers and you have yourself an old-fashioned stalemate. The buyers are more likely to walk away from the deal to see what they come across at a deal.
Land Inventory Increases
Earlier noted was that land purchasers would be looking for higher-quality lands. This is true and one of the trends of 2016. The market as a whole believes there will be an increase in land inventory, however it may not match the wants of the purchaser. The prediction for 2016 is that a number of new farmlands will be introduced into the land market inventory, however they will be low quality. This will drive the prices in the market down but won’t reflect the actual value of the market available.
Regardless this will make the sale of higher-quality properties more challenging. This sort of rounds out the stalemate idea in that some buyers are looking for bargains and will see bargain prices on lower quality lands, yet expect that same bargain price from higher quality lands. A key factor for purchasers, and even sellers, will be distinguishing the lesser quality from the higher quality.
To wrap up, 2016 will prove to be an interesting year for the land acquisition and selling market. Driving factors such as cash rents for farmers, high-quality plots, an understanding of the market, and overall value of the land will play a role in the future of the market.
About the author:
Andrew Fujii is a marketing professional with expertise in digital/web and content marketing. He is also a copywriter for multiple agencies and a contributes to the Michigan Whitetail Properties blog.