Demand For Farmland Grows As Value Rises

By Karen Dent, The Journal
Source: www.nebusiness.co.uk
Published: 14 January 2011

THE value of English farmland rose by 4% in the final quarter of last year giving an annual 12% increase for the whole of the year.

The turnaround comes after prices fell by 10% in 2009 but there are concerns the increases may not be sustainable during 2011.

Figures for last year show that equipped land values increased slightly faster than that of bare land for the second consecutive quarter, while the value of both types of land jumped during each of the four quarters in 2010.

Equipped farm prices surged by 15%, compared with their 14% fall in value in 2009, while bare values shot up by 12% following a 2% decrease the year before.

Land agency Smiths Gore, which produced the figures, said that by the end of last year bare land values averaged £5,400 per acre, while equipped land was around £8,300 an acre.

The ‘equipped premium’ – defined as the difference between bare land values and the value including houses and buildings – also increased again to £2,900 per acre. But it is still well below the 2008 and 2009 average of £3,200 and the £4,300 average seen in 2007 before the economic slump.

Prices were also helped by the lack of supply. Smiths Gore said that there were fewer than 10,000 acres for sale during the final three months of 2010, the lowest amount of land marketed since the first quarter of 2007.

It said that the size of properties coming to market last year was down to an average of 228 acres for an equipped farm, from 269 acres in 2009 and 264 acres in 2008. This, Smiths Gore said, could be partly due to the rise in equipped farm values.

But the average parcel of bare land coming on to the market has also decreased in size and was around 130 acres in 2010, down from 145 acres in 2009 and 150 acres in 2008.

Smiths Gore said that if this lack of supply persists this year, prices will continue rising but other factors could lead to a stabilisation or even drop.

The ongoing review of the Common Agricultural Policy (CAP) and changes to the planning system are among the issues forecast to have a negative impact on land prices.