Farm watch: Will the bubble burst?

Is the UK farmland bubble about to burst? Andrew Shirley, head of rural land research at Knight Frank, thinks not. Commenting on Knight Frank’s farm report, which shows a 38% increase in the value of English farmland in the year to June 2008 (from an average of £3,708 per acre a year ago, to a record £5,100 per acre today), Mr Shirley is confident that the farmland market still has some way to run, and that land prices will increase by 14% in the next 12 months.

Despite the fact that demand continues to exceed supply, with farmers, lifestyle buyers and investors competing for an extremely imited supply of UK farmland, we may have already seen the strongest period of growth, Mr Shirley admits.

‘Buyers are becoming more cautious, as farmer optimism based on strong commodity prices is tempered by massive cost increases notably for oil and gas, which has sent the price of fuel and fertilisers soaring in the past 12 months; as lifestyle
buyers feel the effects of the credit crunch and increased travel costs; and as some overseas buyers especially the Irish and the Danes begin to see UK farmland as expensive.’

On the supply front, Savills report a continued decline in the acreage of English farmland offered for sale in the past 12 months at 69,346 acres, a 17% drop, year-on-year. The situation was even worse in Scotland, where the 13,945 acres offered represented a year-on-year fall of 39%.