FARMERS ARE regaining some lost ground in the land market despite a sharp increase in prices, according to the Royal Institution of Chartered Surveyors.

Lifestyle buyers bought over half of all farms put up for sale a year ago, but results from the RICS’ rural land market survey in England and Wales for the last quarter of 2004 show their share has slipped back to 41%. Individual farmers accounted for 45% of transactions compared with 35% in 2003.

Julian Sayers, RICS rural spokesman, said the market conditions were strongest for commercial farms reflecting pent-up demand from farmers encouraged by higher incomes and a greater certainty over CAP reform.

However, the demand for residential farms had faltered after successive interest rate rises, which pushed up borrowing costs, and a general downturn in the housing market. But this was a slowdown rather than a collapse, he added.

Farm values rose by 25% over 12 months to £4027/acre and bare land also increased significantly, moving up £305/acre to just under £3000/acre.

There was also a modest increase in the amount of land sold and the number of sales reported at the end of the year, but the overall volume was still well down on 2003.

This dearth of supply has meant a lack of historic entitlement to SFP has often not had any impact on the selling price of land. “Surprisingly this has made no difference to local farmers bidding on two farms that we have just marketed,” said Nick Harper of Colchester-based Fenn Wright.

Alec Dickson of Smiths Gore’s York office said: “The market is not yet showing the differential between land with and without historic entitlement that one might expect.”

Over 80 sales, totalling 6177 acres, were recorded in the RICS survey for the last three months of the year, compared with just 51 sales (4695 acres) in the preceding quarter. But, in total, only 22,239 acres of sales were reported to the survey in 2004, down from 32,864 acres the year before.

Mr Sayers said: “Despite the further decline of farmland availability, supply conditions are expected to improve as the implications of the SFP are clarified. Both increased caution from non-farmers and expectations for better availability in 2005 have led surveyors to believe that commercial and residential farmland property prices will flatten out over the coming year.”

Jason Beedell, head of research at Smiths Gore, agreed more land would be available in 2005 but expected prices to carry on rising by 10-20%. “There are still plenty of wealthy non-farmers looking to buy their piece of the countryside and also many who see farmland as a good alternative investment to the stock market or other property types.

“The mid-term review will also give entrepreneurial farmers greater freedom to use the land profitably and some of these profits will be reinvested in more land.”

andrew.shirley@rbi.co.uk