Farm land prices trebled in the closing months of 2006, according to the latest RICS Rural Land Market Survey. Prices reached the highest levels in the history of the survey, rising by 18% compared to 6% in the first half of last year. Demand for farm land is now far exceeding supply, according to RICS, largely due to increasing numbers of city buyers.

Prices rose to an average price of £8,164 per hectare last quarter – up from £7,219 in the first half of 2006. ‘The level of sales in 2006 finished at the highest level recorded in four years, with activity 50% higher than in 2004, and surveyor’s confidence, for both commercial and residential farmland prices rose to the record levels’, confirmed RICS spokesperson Sue Steer.

It seems that competition between City fuelled ‘life-style’ buyers and farmers, keen to expand production and exploit higher commodity prices, is encouraging the dramatic price increases: ‘City slickers are still attempting to take advantage of low farm land prices with large bonuses encouraging ever popular City lifestyle trends,’ commented Ms Steer.

But foreign farmers are also making their presence felt on the farming market. Buyers from Denmark and Ireland find the prices of farm land in Britain much cheaper compared to those in their homelands. ‘The UK continues to attract investment from Denmark and Ireland as foreign buyers enjoy the luxury of low prices compared to home markets,’ Ms Steer added.

A stronger farm land market has resulted in renewed optimism amongst the agricultural fraternity. Despite rising interest rates, farmers are feeling less pressure to sell creating a shortage of supply which is pushing prices up further.