Prime arable land value rises 8.5% this year

Farmland prices are set to increase by 40% over the next five years, according to Savills.

The shortage of land on the market, coupled with the weight of investor cash looking for farmland and a tax regime that favours farmland investment, along with the expansion of successful farm businesses, are key factors behind the expected increase in values.

The company said the average value of farmland continued to rise across Great Britain during the third quarter of 2013, with prime arable land in the east of the country achieving the highest average value of more than £9,000/acre. (See Savills’ research).

Savills forecast an 8.8% rise in farmland values in 2013 and prime arable land had already risen 8.5% by the end of the third quarter, the land agent said in its Market in Minutes report. “For good-quality commercial arable land and the best dairy farms, growth of nearer 15% is feasible,” it added.

About 128,300 acres of land have been publicly marketed in Great Britain in 2013, a 5% rise on 2012. However, supply continued to be historically low. Anecdotal evidence suggested up to 30% had traded privately in 2013.

The average value for prime arable land rose 2.3% in the third quarter of 2013, giving annual growth of 14.5%. The research gap between prime arable land and poor grassland has also increased from £1,344 in 2003 to £4,373 in 2013.

In addition, there are 13% more applicants with £5m-10m to spend on farmland than in the previous three years.