Farmland prices are continuing the upward trend seen during the second half of this decade, according to figures from Strutt & Parker. During this time, land prices have doubled from an average of around £3,000 per acre in the second quarter of 2005, to a peak of £5,960 in the same quarter of 2008. Since then, although values have fallen away slightly, they have staged a recovery and now remain steady. Average values currently lie at 6% below the 2008 peak.

While the 2010 first quarter rate rise is slightly below inflation, Savills point out that gold, a commodity that is much easier to trade than farmland, recorded some price correction during the same period both in current and real terms. However, looking ahead they anticipate that growth will comfortably outstrip inflation by the end of the year with gold and farmland continuing to be good hedges against inflation.

The resilience in the land market will come as a relief for arable farm owners, who are struggling with low commodity prices and the rising price of oil.
 
Christopher Miles head of Savills farm agency in the East comments: ‘While values have risen for all land types, the gap between the best and the worst is widening. Good quality land in high demand areas is now fetching up to £8,000 per acre whilst poorer land in less popular locations is nearer £4500 per acre. Savills Farmland Value Survey shows that the average rise in value for an acre of Grade 3 arable land during the first quarter was, at 1%, below that of inflation.

European and lifestyle buyers are back

In March 2010, Strutt & Parker sold Hettons Estate in Northumberland. At about 3,250 acres it is the largest farming estate to be sold in Northumberland in recent times and is used as barometer of the demand for large commercial farms. Launched with a guide price of £16 million, the farm has been sold to Dutch buyers who are keen to take advantage of the weak Pound and relatively cheap value of land in UK. In some parts of Holland bare land values are as high as €55,000/ha (£20,000/acre). ‘We are expecting more interest from Dutch and other European buyers this year, particularly if Sterling remains weak against the Euro,’ they add.

Ian Bailey head of Savills rural research comments, ‘The fact that non-farmer buyers have, albeit tentatively, started to re-register their interest in farmland combined with a continuing low interest rate environment leads us to see no reason why farmland values will not gain momentum and we fully expect annual growth to be in line with our forecasts of around 5% to 6%.’ Cash buyers now represent over 60% of applicants registered with Savills to buy farmland. Most of these applicants are looking to purchase a property of up to 500 acres.