Farmland values reach record levels

Farmland values have reached record levels, according to the Royal Institution of Chartered Surveyors.

The organisation’s latest rural market survey said values for the first six months of the year had risen 22.6% compared with 18% in the second half of 2006.

Average prices increased £686 to £3581/acre. Arable land rose 23% to £3758/acre, while pastureland was worth an extra 22% at £3402/acre.

Farm sales fell

Farm sales fell by almost 30%, but the number of purchases by individual farmers increased to 50%, the highest level recorded by the survey.

Activity by institutional investors doubled to 4%.

Blackrock, one of the world’s biggest fund managers, has just launched a £100m fund that will invest in UK agriculture.

Growing investor appetite

About £15-£20m of that is believed to be earmarked for buying commercial arable units.

RICS rural spokeswoman Sue Steer said three factors were driving prices upwards.

Farmers expanding production on the back of improved commodity values, record City bonuses and growing investor appetite for rural land.

‘Feeding frenzy’

“Rising commodity prices and increased interest in biofuels have resulted in a bit of a feeding frenzy for farmland as farmers compete with investors, foreign farmers and lifestyle buyers for properties.

“The market is being fuelled by City buyers trying to make the most of low farmland prices and farmers from Denmark and Ireland are also becoming more visible as they buy up competitively priced land in the UK.

“Supply remains constrained and insufficient to satisfy the appetites of buyers,” she added.

Further rises

Farmers felt under little pressure to sell given the rise in commodity prices, and the overall strength of the wider economy mean “lifestyle” owners were also not putting many properties up for sale, said Mrs Steer.

Prices are set to rise even further, with a record number of chartered surveyors who responded to the survey expecting further growth over the coming year for both commercial and “residential” farms.

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