Strong demand boosted farmland prices by 6% during the first half of 2010, according to the latest RICS rural land market survey.


Its “opinion-based” measure, which looks at bare land only and excludes any residential component, shows that prices have risen from £12,715/ha (£5146/acre) to £13,530/ha (£5476/acre) since the start of the year.

But the “transaction-based” measure – actual sales, including residential property – fell over the same period, from £16,126/ha (£6526) to £15,177/ha (£6142), reflecting the slowdown in the wider housing market.

Demand for non-residential farmland remains strong and anecdotal evidence from surveyors suggests that commercial farmers are still keen to expand production, on the back of higher prices.

With supply of farmland likely to remain tight, RICS predicts that the resulting supply/ demand imbalance means prices should continue rising over the next 12 months, especially in the commercial farmland sector.

“The demand for farmland shows no sign of abating and it continues to outpace supply,” RICS spokeswoman Sue Steer said.

“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 farm gate, it seems farmers are willing to pay a premium to do so.

“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 that is outperforming other markets. These investors are competing with farmers and keeping prices high,” she added.

Bare land prices: England & Wales (£/ha)

 

Average

Arable

Pasture

H2 2009

12,715

13,713

11,718

H1 2010

15,530

14,942

12,117