Land values forecast to rise further on back of strong 2021

Farmland values across Great Britain increased by an average of 6.2% to £7,178/acre during 2021 and are set to rise even further over the next few years, according to Savills.

Results from the land agent’s most recent Farmland Values Survey report the strongest annual growth since 2014, due to the sustained lack of supply and growing number of competing active buyers.

Poor livestock land and average livestock land have increased 8.8% to £4,475/acre and 8.7% to £5,931/acre respectively since December 2020, Savills’ data show, with poor livestock land reaching its previous peak in some regions.

See also: Land in your area 2021: East of England

Meanwhile, prime arable and Grade 3 arable grew 4% to £9,169/acre and 5.5% to £7,807/acre respectively on the year.

The strongest growth across all land types was recorded in Scotland, where values increased 31.2% to £5,915/acre in 2021. This is a result of the demand for tree-planting land in a buoyant forestry sector, as well as interest from environmentally motivated buyers.

The market has been subdued due to political and economic uncertainty since the EU referendum, said Savills, but farmland’s history of long-term stable returns remains appealing against the volatility of other asset classes in recent years.

More increases predicted

Farmland values are forecast to increase in the short term, but rates of growth vary depending on land type, geography and quality.

According to Farmers Weekly’s land tracker, the amount of publicly marketed farmland in 2021 (64,045 acres) was down 2% on 2020 (65,103 acres), which was a uniquely challenging year and already down 33% on 2019 (97,614 acres).

This reflects a slower-than-expected bounce back, suggesting that in the short- to medium-term, supply levels are unlikely to recover to those seen historically, said Savills.

Based on 2021’s supply and demand make-up, the agent has revised its original forecasts.

From 2022-26, Savills now expects poorer-quality livestock land value growth (6% each year) will outperform prime arable land (2.5%), as the ability for pasture land to provide valuable carbon and water management services is increasing its demand over other land types.

For prime arable land, commodity prices in the short-term look set to hold and an increasing interest in energy crops and renewables may continue to support profit from production, and consolidation of the most productive businesses will drive competition for the best land, supporting values.