Farmland prices defy the slowdown

Apr 25 2008 by Tom Patterson, The Journal

THE price of farmland has soared by 34% during the past year, despite the slowdown in the wider property market, figures showed yesterday.

The average value of all agricultural land had reached a record £4,621 per acre at the end of March, with good arable land regularly selling for more than £6,000 an acre, according to estate agents Knight Frank.

The group said the price of farmland had risen by 12% during the first three months of the year alone, the highest quarterly increase on record.

Andrew Shirley, head of rural land research at Knight Frank, said: “The UK farmland market not only continues to shrug off the credit crunch affecting other property classes, but continues to grow in value at a phenomenal rate.”

The boom in farm prices is being driven by a growing number of potential buyers fighting for a limited supply of land.

The group said demand had increased by nearly 19% during the past year, while the amount of land coming on to the market had remained flat. This demand is being driven by farmers, who are feeling increasingly optimistic due to improved commodity prices, especially in the arable sector.

Farmers and agricultural businesses now account for 57% of all purchases, with Irish and Scandinavian farmers looking for land that, even at current prices, remains much cheaper than in their own countries.

So-called lifestyle buyers are also still active in the market, accounting for 29% of sales, although they now face growing competition from farmers and are no longer the dominant force they once were. Knight Frank said a number of investment funds had also been set up to invest in farmland, as investors tried to cash in on the global commodity boom.

Mr Shirley said: “Their presence in the market is an example of the serious amounts of money being invested in agriculture around the world.

“While this trend continues – and analysts are predicting an extended bull run for soft commodities – UK farmland values should continue to benefit.”