Knight Frank is the latest property firm to confirm that land prices rose sharply last year, following the release of record figures last week from the Royal Institution of Chartered Surveyors.

The firm said farmland prices increased by an average of 25% to £4316/acre last year. Growth in the final quarter, however, was more modest.

“It is clear that the problems facing the wider property markets have not been felt in the agricultural sector,” said Clive Hopkins, head of farms and estates.

“Over the last quarter of 2007 the trend for growth continued, though at the more modest rate of 3.3%.

“While this means the market has now witnessed seven consecutive quarters of growth it should be noted that price rises have softened since their peak during the third quarter of 2007 when a 7.8% increase was recorded.

“The cyclical nature of land purchase traditionally sees a slower market in the final quarter of the year,” added Mr Hopkins.

Ashwell Farm

In contrast to some other agents, Knight Frank said non-farming money was still the main driver behind the growth, although farmers were catching up.

“As in previous periods the market has been largely driven by non-agricultural money. Lifestyle buyers continue to be the most active purchasing sector (37%) as they seek to add value to their properties while also protecting their immediate outlook,” said Mr Hopkins.

“Indications suggest this trend will continue through 2008, though at a lower rate due to a weaker outlook for the UK’s high value-added business services sector, which is the source of many non-agricultural buyers.

“Foreign buyers continue to exert a strong influence on the market, with 17.5% of all purchasers coming from overseas.

“As in previous quarters the Irish are the most acquisitive, 47%, which is no doubt due to the prices in the UK being vastly more affordable than those in Ireland where an acre now averages €20,367 (£15,237).

“As anticipated, individual farmers provide the sector’s second most significant purchasing force with 34% entering the market, driven by recent increases in commodity prices.”

Hill farm

Mr Hopkins said further price increases were expected this year. “Looking forward the agricultural market shows little sign of weakening. With supply limited and demand strong we consider land prices will increase by 13% over the next 12 months while rents will rise by around 12.5%.”

However, his prediction was slightly less bullish than the 25% announced this week by Savills, another property firm.

“It is possible that the market for residential farms and estates may come under pressure from the expected downturn in the residential market next year. However, the continued imbalance between supply and demand should mean that high quality farms and estates in sought after areas will continue to sell well,” Mr Hopkins said.