Renewed demand for farmland from lifestyle buyers is contributing to rising land prices and may be starting to shift buying power.
Interest from commercial farmers remained “very strong” in the first half of the year, said the interim rural land market survey from the Royal Institute of Chartered Surveyors (RICS) and the Royal Agricultural University.
However, after a decade-long trend of declining activity from lifestyle buyers, there had been renewed demand since the end of 2013, as upturns in the economy and housing market filtered through, said Joshua Miller, senior economist at RICS.
Lifestyle buyers typically tended to buy farms with good residential properties and locations and with an interest in having a farm, but not managing it themselves.
Alongside strong farmer desire to expand, this was adding to the imbalance in supply and demand of land and helping to fuel continued land price rises – with a 12% rise in prices in the year to June this year, said the report.
Buying power was potentially starting to shift away from farmers towards lifestyle buyers in areas where there was high interest from both, said Phillip Cowen, head of rural for agent Bruton Knowles.
“Twelve months ago commercial farmers were undoubtedly having a stronger hand, but this has most certainly equalled out,” he said.
“Lifestyle buyers are more bullish about the future and seeing farmland as a long-term investment. They may start to push [prices] ahead of where farmers want to pay, particularly as the economy picks up.”
“However, this is not the start of a major trend. Farmers will always underpin the [farmland] market and will continue to provide the baseline – Britain has a very strong farming industry that will always see value in farmland.”
In nearly every region across Great Britain, more land agents thought there had been an increase in demand from lifestyle buyers, than those who thought there had not been.
This was with the exception of Scotland, where overall there was no change due to a number of factors including political uncertainty ahead of the independence referendum.
Agents in the East, North West and South West of Great Britain in particular said they had seen an increase in demand from lifestyle buyers, with opinion showing less demand in Wales and the West Midlands.
North Cornwall, Pembrokeshire, Gloucestershire, the Yorkshire Dales, Norfolk and Cambridgeshire were particularly popular with lifestyle buyers wanting to buy farms, said Matthew Peters, RICS’ south west spokesperson.
A number of factors might come to influence farmland demand, said Mr Peters – changes to inheritance tax rules could hit farmland may make it less of an attractive option, while promised interest rate rises might prove obstructive for buyers needing to borrow.
However, while the London housing bubble existed, demand was likely to remain strong, he said.