Optimistic arable sector keeps land price on rise

Land prices are continuing to rise as agricultural property supply remains tight while farmers, buoyed by higher commodity prices, return to the market.

English arable prices have risen by 5% over the past 12 months and now stand at £3061/acre, according to property firm Strutt & Parker.

Across Great Britain, the value of all types of farmland rose by 4.3% during the first half of 2006, adding to the 12.3% growth recorded in 2005, said Ian Bailey, head of rural research at Savills.

Strutt & Parker’s Mark McAndrew said the firm’s latest figures showed that farmers were now a significant buying force after a period of relative inactivity.

“In the 12 months to the end of September, farmers bought as many of the farms being sold by Strutt & Parker as the so-called “lifestyle” buyers, who have dominated the market in recent years,” he said.

“There is no doubt that farmers are definitely back in the market”.

“Forward grain prices are significantly ahead of projections, most of them have had a decent harvest and, in the longer term, there is a growing feeling that soft commodity prices will rise.”

Mr Bailey said he had also picked up signals that farmers were more active. “When I talk to agents they say there are definitely more farmers looking for land.”

Grassland was seeing some of the strongest price rises, said Mr Bailey, with poor quality pasture rising 8% to just over £1700/acre.

“I think with the SPS we’ll see the differential between arable and pasture declining on all acres. Lifestyle buyers want picturesque countryside.”

Prices

Prices were unlikely to fall, reckoned Mr Bailey. “There are plenty of buyers out there. It would take a lot more land on the market to push prices down,” he said.

This seems unlikely given farmers’ new-found optimism. “For almost five years – thanks to foot-and-mouth and the introduction of single payments – the land market has been living with tremendous uncertainty and the amount being offered for sale has fallen dramatically,” said Mr McAndrew.

“However, with that uncertainty now effectively at an end this year, I had expected the volume of land to rise significantly. But that just hasn’t happened yet.”

During the past 12 months 113,784 acres were put up for sale in England, a rise of 13%, but still well below market expectations of a 30-40% hike, said Mr McAndrew. “And in the third quarter of this year the amount of land launched was actually down 2.5%.”

In the first nine months of the year, 152,000 acres had been marketed in Britain compared with the same period in 2005, said Mr Bailey. “That is only 4% more. With interest rates remaining relatively low, there is not the pressure to sell.”