Falling demand pushes land prices down 10%

Falling demand from farmers has pushed land prices down by 9% in the past 12 months despite tightening supplies of mixed use and commercial farmland.

Based on actual transactions, the average price of farmland in England and Wales now stands at £9,936/acre, down from £10,751 this time last year.

That’s according to the latest Royal Institute of Chartered Surveyors (RICS) rural land market survey for the first half of 2017.

See also: Ten years on: UK farmland and the credit crunch

The values are for transactions where the residential element represents less than 50% of the total value.

However, this average hides a wide spread in values, with prices ranging from £7,000 to well over £10,000/acre for arable land, agents say.

Negative forecast

Agents in the survey valued bare arable land at £8,378, down from £8,982 in the first half of 2016, while valuations for bare pasture have also fallen from £7,143 to £6,704 in the same period.

This makes the fourth consecutive report in which demand has reportedly declined, with respondents to the survey again calling for post-Brexit clarity with understandable, stable long-term policies.

Institute members have forecast for prices to continue falling over the next 12 months.

RICS said anecdotal evidence suggests demand for higher quality land remains stronger, with purchasers shown to be more selective when it comes to lower grade farmland.

Blocks with a residential component continue to be more resilient than purely commercial lots.

Off the market

Jason Beedell, partner at Strutt & Parker said prices are reliant on acquisitive local farmers and investors looking to roll-over funds from the sale of residential development land.

He said: “Where there is strong local interest, buyers are paying similar prices to the peak; elsewhere, land is struggling to attract interest and sell. 
“Because of this, more land is being tested ‘off the market’, with neighbours or known active buyers, rather than being formally advertised and put ‘on the market’.

Alex Lawson, director of national farms and estates at Savills, said: “Given the wider political and economic landscape, it is unsurprising that there are some concerns in the market.”

“However, there is an inherent confidence in the sector and where quality farms and estates are priced and presented correctly, they continue to sell well.”