Farmland in Britain is increasing exponentially in value, according to new research from Savills. A short supply of farmland on the market coupled with increasing demand has led to a 14.9% price increase over the last 12 months. The figures show that cumulative growth since the beginning of 2004 now stands at 50%, and average values exceed those recorded during the peak in the mid 1990s.

The grassland sector has seen the most significant growth, according to Crispin Holborow, head of Savills farm sales team. Increases of 41% and 63% were recorded for medium and poor quality pasture respectively last year. Mr Holborow attributes the rises to the strong demand from the lifestyle buyer for farms located in picturesque locations, which most commonly are livestock units. ‘Lifestyle buyers who have accounted for as much as 40% of all purchasers in recent years, reduced to 30% during 2006 following increased competition, but still remain a major feature of the market and a proportion of the latest City bonus pot is predicted to find its way into rural property this year,’ Mr Holborow explained.

Meanwhile farmer activity on the buying side increased for the third successive year, according to the research. In 2006 51% of all buyers were farmers compared with 49% in 2005.

Purchasers are also investing in farmland to a greater extent, with 16% of all purchases in 2006 solely for investment purposes. The number of overseas buyers has also increased, particularly from Danish buyers who represented 9% of all purchasers and 40% of purchasers for farms over 500 acres.