Farmland values set for steady growth

Farmland values are on course for a tenth consecutive year of annual growth, says Savills, following a 3.9% increase in value for all land types during the first half of this year.

While the volume of publicly marketed farmland fell by 9% during the first half of 2012 in Great Britain, substantial acreages had been marketed privately, while the volume marketed in Scotland rose by 9%.

Farmers continue to be the highest proportion of traders, representing more than half of buyers and sellers, with expansion the main driver for purchases. Personal reasons, including retirement, death and divorce, were grounds for selling in about one-third of cases, compared with 25% in 2011. Debt prompted about 11% of sales, a similar proportion to last year.

Investment buyers accounted for 27% of purchasers, compared with 17% at the same time last year. Only one-quarter of all buyers funded their purchase primarily with borrowings.

Savills is predicting 5% growth for UK farmland across the whole of 2012 and 36% over the next five years.

Its model factors in farm incomes and commodity prices linked with yields and farm subsidies.

Uncertainty about the effect of CAP reform, coupled with the wettest June on record and availability of winter forage and bedding stocks were adding pressure, while the forecasts were moderated by the slow recovery in the prime country house market.