Strong demand keeps UK farmland prices high

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Farmland prices high due to strong demand

Strong demand and a limited supply has kept UK farmland prices high with an increase of 8% for arable land so far this year.

The latest Farmland Value Survey from Savills Research shows that the 7% baseline forecast for values for this year is proving to be realistic.

‘Values this year have been supported by a limited supply of farmland and a strong demand. There was a 56% increase in new buyers registering on our database during the first three quarters of 2010 compared with the same period of last year,’ said Alex Lawson, director of Savills.

‘In particular, good quality arable land down the eastern side of the country has sold well with values regularly up at £8,000 per acre and in certain cases as much as £10,000 per acre,’ he added.

The average value of Grade 3 arable land in England is now £5,462 per acre, which reflects an increase of 3.6% for the quarter and a cumulative growth of 10.4% for the year to date. It means that average values are now higher than at their previous peak of June 2008 when they reached £5,170 per acre.

In contrast though, average values in Scotland remained under pressure with prime arable land on the east coast, supported by a good potato and wheat harvest, performing best. Values increased by 4.1% for the quarter.

‘Our research shows that the proportion of buyers with funds between £2 million and £10 million has increased this year compared with the previous three. Three quarters of all Savills applicants have funds in this range to spend on farms and estates,’ said Ian Bailey, head of Savills Rural Research.

Looking ahead, Savills expects demand to remain price sensitive, especially where future income generating opportunities are limited. ‘Our main baseline forecast for the short to medium term remains unchanged at around 6% per annum, although we expect growth in values to be diverse and largely related to quality,’ added Bailey.

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