Farmland prices still growing year-on-year

New research from Knight Frank shows average farmland prices are still recording year-on-year growth, despite another fall in values in the first three months of this year.

English farmland values fell for the third quarter in a row, dropping 2.6% to £4673/acre, according to the firm’s Farmland Price Index. However, this is still just over 1% higher than 12 months ago.

“Farmland must be just about the only property sector where one can still see a 12-month increase in values,” said Knight Frank’s head of rural research Andrew Shirley.

“The rate of decline in the last three months has slowed significantly, compared with a 5.2% fall in the final three months of 2008. Values have now fallen in three consecutive quarters, the first time this has happened since 2000, but the slide needs to be put into context.

“Prices are still up slightly on an annual basis (1.1%) following exceptionally strong growth in the first half of 2008 and the agricultural land market certainly remains more resilient than other property sectors. Average farmhouse values, for example, have fallen by almost 20% during the same period,” Mr Shirley said.

There was also some evidence for an increase in land values by the end of the year, he added. “Prices may weaken marginally next quarter, but investors, farmers and a small number of residential buyers will return to the market by the end of the year and this extra demand should ensure values level off again. If commodity markets improve, prices could start to rise again as early as the final quarter of this year.”

Rupert Sweeting, the firm’s head of country houses, said that while prices for prime country residences had fallen by 20% in the last 12 months, the rate of decline had now halved. He reckoned values could be within 5% of the bottom of the market.

“We are undoubtedly in a very different place compared with the end of 2008.

“Viewings are starting to approach normal levels and we are even seeing a return to competitive bidding in some circumstances. Vendors’ expectations are beginning to match buyers’ appetites, while at the top end of the market, the weakness of sterling continues to attract buyers from Europe, Russia and the CIS who are looking in the country as well as London.”