Farmland prices steady through summer

Economic pressures may be taking the heat out of the farmland market, with the average value of an English acre falling by 1% in the third quarter of the year, according to Knight Frank.

However, the firm’s Farmland Index puts bare agricultural land at more than £6,000/acre, 5% higher than a year ago and almost double its 2006 value. The index is put together using actual sales data and opinion on land values.

Prices are likely to remain flat or weaken slightly in the final quarter of the year, according to head of KF’s farms and estates team Clive Hopkins, who believes they will rebound in the first half of 2012.

The slight dip in prices reflects the level of activity and time of year, according to Tom Raynham, head of national farm sales at Knight Frank.

Although there was plenty of money still looking for farms and some evidence of a resurgence in fund interest, buyers were taking a much tougher stance when negotiating deals, he said.

“There is a perception that anybody who is selling must have a good reason for doing so. Potential purchasers don’t feel they need to rush into a deal and are prepared to wait for the right price.”

However, buyers were still interested in the right product, said Mr Hopkins. “They are just being more selective and bidding more cautiously. A number of high-net-worth clients looking to invest are waiting to see how the economic situation pans out over the next six months or so.

“Against the backdrop of growing economic uncertainty in the UK and around the world, I think there was a bit of a perception among buyers and investors that the market could be overheating slightly.

“The general direction of the land market is still upwards as investors look to tangible assets supported by strong fundamentals. I think the pattern of price rises followed by periods of flatter growth will continue for the next few years.