GB farmland supply and values starting to grow

The low supply that has characterised the farmland market for a number of years appears to be starting to turn, according to some agents.

After a slow start to the year, the 2021 market has grown into a new level of activity, with many farms and estates attracting multiple bidders and selling for more than their guide price.

The pool of potential buyers is increasing more rapidly than before and the demand has pushed a rise in values for all land types.

See also: Private sales rise in popularity to near 50% of land market

High demand

Savills’ data show 58% more farmland was publicly marketed in the first half of 2021 than in the same period the previous year – which was, of course, an extraordinary year.

Across Great Britain, supply to 30 June 2021 was only 8% below the five-year average.

Alex Lawson, head of rural agency at Savills, said: “This indicates that previous uncertainties surrounding trade deals and the agricultural transition are making way for renewed confidence, allowing farmers to make informed business decisions.”

Demand remains strong, with 28% more potential buyers registered so far this year than in the first half of 2020. Interested parties include rollover buyers and commercial farmers seeking quality farms.

Values have increased for all land types, with average and poorer-quality livestock land outperforming others, up 1.87% and 1.54%, respectively.

This means that values for average livestock land have almost returned to the peak levels last seen in 2015.

“This may be a result of amenity buyers looking to acquire smaller plots of land, fuelled by the desire for more outdoor space following the pandemic,” said Mr Lawson.

“The growth in values for livestock land is particularly focused on south-west England, which has been a popular area for those seeking to escape the urban life.”

Rising prices

According to the Knight Frank Farmland Index, the average value of farmland in England and Wales has broken the £7,000/acre barrier for the first time since June 2019.

Prices for bare land rose 2% in the second quarter of 2021 to £7,065/acre, helping boost annual growth to 1% – the first positive 12-month movement recorded by the index over the past five years.

Strong demand and historically low levels of supply are helping to support values.

Andrew Shirley, head of rural research at Knight Frank, said: “Environmentally minded buyers are becoming particularly active at the moment, including a number of Hollywood film stars who have been in touch regarding the potential to buy land for rewilding.

“Meanwhile, the potential to earn carbon credits from farmland, not to mention attractive returns from renewable energy schemes like solar PV, is also peaking the interest of institutional buyers.”

Bidding wars

Strutt & Parker is currently seeing multiple buyers for most of the farms the group is selling, with some prime properties sparking bidding wars and selling for well in excess of their guide.

There have even been some instances of gazumping, which has not been seen in the farmland market for the past five years.

Matthew Sudlow, head of estates and farm agency at Strutt & Parker, said: “One farm we recently marketed that was being sold in lots attracted bids from 31 bidders and went under offer for £1m more than its guide.

“In fact, our analysis shows that more than 70% of the farms and estates that have sold in recent months have exchanged hands for more than their guide.

“One of the factors behind this is the wide range of buyers currently looking for land, with farmers, private investors, lifestyle buyers and green investors all in the mix.”

The range of prices paid for both arable and pasture land remains large, with the land achieving the highest prices tending to be in areas popular with lifestyle buyers or private investors, such as the south-east of England and the Cotswolds.

According to Strutt & Parker, arable land has sold for £6,800-£15,800/acre across the first six months of 2021, with an average of £9,000/acre in the second quarter of the year.

The feeling among agents is that this average will have crept up by September, said Mr Sudlow.

Pasture land has sold for £3,000-£10,000/acre in the first half of the year, with an average of £7,100/acre.