Bare land values rise, but equipped farms struggle

Agricultural land values in England rose by 2% during the third quarter of 2009, according to Smiths Gore.

The firm’s review of the farmland market found that bare land prices increased to an average of £4900/acre between July and September, as demand from commercial buyers remained strong and supply stayed tight. Just 5300 acres of bare land was marketed this autumn, half the amount in 2008.

It was the first increase in bare land values recorded this year after prices had remained at £4800/acre during the first half of the year.

But, weaker demand from non-farmer and investor buyers meant the value of equipped farms fell for the fifth quarter in a row, by 6% to £6900/acre over the same period, Smiths Gore said.

This meant the “equipped premium” – the difference between bare land values and the value including houses and buildings – had dropped significantly from an average of £3200/acre last year to just £2000/acre.

“Bare land values have risen in the third quarter. However, there is considerable patchiness in demand for farms,” head of farm agency, Giles Wordsworth, said.

“The best quality farms continue to be in demand and they are selling well, often above their asking price; but lower quality farms are struggling to sell and there are more examples of over-inflated asking prices being reduced.”

The firm forecast that prices for all farms would rise by 2-3% in 2010, but lower quality equipped farms could continue to fall in value, unless a stabilisation in the housing market had a knock-on benefit for equipped farms.