Falling supply and rising demand drove up the price of bare farmland in England and Wales by 6% during the first half of 2010, according to the latest RICS rural land market survey.
The trend was mainly down to commercial farmers keen to grow their businesses, according to contributing surveyors who predict more of the same in the months ahead.
The average price of bare land hit £13,530/ha (£5478/acre) at the end of June, compared with £12,715/ha (£5148/acre) at the start of the year.
“The demand for farmland shows no sign of abating and it continues to outpace supply,” said RICS spokeswoman Sue Steer.
Farmers accounted for 59% of purchases, similar to levels recorded over the past two years. “As in the previous survey, we are seeing demand from farmers who are keen to expand their production, particularly into neighbouring farms.
“Given the elevated prices at the farmgate, it seems farmers are willing to pay a premium in order to do so.”
Reflecting this, 47% more chartered surveyors reported a rise in demand for commercial farmland compared with those reporting a fall. This compared with 31% in the previous half year.
However, the value of residential farmland, where residential buildings account for half or more of the value, fell over the same period, from £16,126/ha (£6529/acre) to £15,177/ha (6144/acre). This reflected a slowdown in the wider housing market, the report said.
Demand for residential farmland did increase, but less sharply than for bare land. At the same time, supply for both bare and residential farmland continued to decline, but nowhere near as sharply as in the last half of 2009.
Over the next year, there is strong agreement among surveyors that while prices will start to edge up again in the residential farmland sector, bare land values will continue to post strong gains.
“Farmland continues to be viewed as “recession proof” and we are seeing UK and overseas investors purchasing commercial farms as an alternative form of investment which is outperforming other markets,” said Ms Steer. “These investors are competing with farmers and keeping prices high.”
RICS report: Quotes from the regions
“Very strong market with good quality arable land prices around £5750/acre. Strong demand from farmers with some investors now coming back into market. Varied picture with pasture land according to location.” Jamie Tattersall, Youngs Chartered Surveyors, Alnwick
“Significant disparities between bare land in one location and another – 15 miles can be the difference between £7000+/acre and £4500/acre. The farming buyer is the driving force.” David Ward, Fenn Wright, Colchester
“A lack of supply and continued demand from a broad spectrum of buyers is continuing to drive up values. We are seeing a little more land coming to the market and hope this trend will continue.” Charlie Seligman, Savills, Winchester
“Many progressive commercial farmers are seeking bare land or additional units and are prepared to travel out of county.” Andrew Tuffin, Symonds & Sampson, Sturminster Newton.