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City Bonuses Fuel Farmland Boom

Farmland prices will be in the media spotlight this autumn and winter, according to the NFU. Farmland value directly corresponds to bonuses coming out of the City, and with 3,000 people forecast bonuses of over £1 million, farmland prices look set to strengthen.

Both residential and commercial farmland have already increased in value this summer. The latest Knight Frank Farmland survey showed that demand over the last three months has pushed prices up by 4.3%, with 38% more acres being traded than this time last year. ?Resolution of the single farm payment issue has pushed land onto the market, increasing sales activity,? commented Sue Steer from RICS.

As the City economy continues to strengthen, property experts forecast further investment in agricultural land. ?It is likely that bankers will want to invest their earnings in tax efficient ways,? says NFU Rural Surveyor Robert Sheasby. Britain?s current tax regime benefits those who invest in agricultural land. Over the last three years the percentage of buyers from outside agriculture has risen to 44%.

Hampshire, Oxfordshire, Wiltshire, Hertfordshire, the M3/M4 corridor, the M40 corridor, Herefordshire, and West Berkshire are the areas with the strongest price growth, says Clive Hopkins, Head of Farms at Knight Frank.

The NFU believes the increased value of farmland will have a positive effect on British farmers. ?The growing capital value of estates means farmers have the ability to borrow greater sums of money for diversification,? Mr Sheasby explained, adding that large numbers of city buyers do not have the necessary time, skills or equipment to farm their own land, ensuring neighbouring farmers can expand their businesses easily and cheaply.

Although the rising cost of farmland makes entry into the market difficult – farmers still comprise 44% of farmland buyers. ?This demonstrates the belief in a future in agriculture,? said Mr Sheasby. ?Farms are definitely still expanding.?

Another new dynamic in Britain?s farmland market is the arrival of buyers from northern Europe and Ireland, who are securing large swathes of commercial farmland in East Anglia, Lincolnshire and Norfolk. ?There is definite evidence of foreign farmers coming across ? hardly surprising when you consider Irish farmland sells for around £14,000/ha (£5665/acre) ? almost double what is sells for in some parts of Britain,? said Mr Sheasby.

But the NFU stresses that it does not see foreign farmers as a threat to British farming. ?They provide a business opportunity,? Mr Sheasby said. ?They are coming into a new marketplace and could benefit from our expertise and supply.? The ?new? farmers also help push up land prices. ?Investment from Ireland and elsewhere has led to demand outstripping supply,? commented Ms Steer.