Farm values have fallen for the third month running and demand is also starting to slip, according to new figures from the Royal Institution of Chartered Surveyors.

The organisation’s latest quarterly survey of its rural land agent members shows that the average price for farms sold between July and September was 9382/ha (3797/acre) – a 2.3% decrease on the previous three months but still only 1% down on the same period last year.

Greater caution in the housing market had affected demand for residential farms – those where more than half the value is accounted for by dwellings – and contributed to the softening, said RICS, while the downturn in agricultural output had also undermined interest in commercial farms.

However, the figures are based on an extremely low survey sample, with only 52 sales, totalling 2400ha (5930 acres) reported.

This was blamed on the continuing uncertainty related to the transfer of the single farm payment.

“Entitlement values are causing confusion in sales and exchanges are slow,” said Alex Rew of south-west agent Stags.

In Wales, Tim Barter of Carter Jonas said: “The expected increase in land and farm availability has yet to happen.

Caution on the part of owners still seems to be high, waiting for single payments to be made before decisions to sell are carried through.”

This lack of supply, however, has led to predictions by the agents questioned for the survey that there will be a modest rise in the price of commercial farms.

But there is less confidence in the prospects for residential properties – the first negative outlook in 10 years.

“The residential farms market is becoming far more selective,” said Matthew Peters of Gloucester agent Bruton Knowles.

While the market for whole farms appears to be becoming more uncertain, bare land values continue to rise, topping 8000/ha (3238/acre) for the first time, according to the survey, compared with 7017/ha (2840/acre) a year ago.

“In the light of a lack of profitability, there are still farmer buyers in the market for arable land.

Pasture is tending to be offered in small parcels and purchased by non-farmers,” said Martin Shouler of Melton Mowbray-based Shouler & Son.

andrew.shirley@rbi.co.uk