Grade 3 arable land prices continue to rise

Mid-year figures show grade 3 arable land in England changing hands at an average of £5,900/acre, a rise of 6% since January and almost 200% in the past decade, according to Savills’ Q2 Farmland market report.

However, the firm predicts that growth is likely to slow in the second half of the year, with buyers becoming more cautious and price sensitive. Farmers looking to expand are still the main buyers, although more interest from lifestyle buyers means these accounted for about one-third of all buyers compared to less than a quarter in 2010, the firm said.

Debt is increasingly cited as a reason for farmland being for sale but the report predicts that supply is likely to remain tight for the rest of the year.
While good land is sought after in all regions, the east of England and most recently the north of England have seen the strongest growth in arable land prices so far this year, with grade 3 arable land in these regions averaging £6,800/acre and £5,230/acre respectively.

Average arable land prices in the West Midlands were static in the second quarter, while the South West grew by less than 1% and the south east of England just 1.4% – these were lower growth rates than in the first three months of the year.

The average price of grade 3 arable land in Scotland has stuck around the £4,000/acre mark since September 2010, although very little land was marketed during the first five months of this year.

The strengthening of supply and an increase in buyers reported since May could have an effect on values in Scotland during the second half of the year,” the report said.

However, average prices mask the increasing polarisation of the market, with a widening gap between highest and lowest prices.
“Values achieved are increasingly dependent upon location, quality and land type. Grassland values in the East Midlands came under pressure during the second quarter of the year, reflecting the mixed activity in the market. In contrast, in the South West, grassland values rose faster than arable values during the same period,” said Ian Bailey, head of rural research at Savills.

Looking further ahead, Savills sees continued annual land price rises ranging between 7.8% and 8.5% through to 2015.