Rural land prices continued to climb during the first half of the year, reaching the highest levels in the survey’s history, reports the RICS rural land market survey published today (28 September).
The farmland market strengthened, with prices rising by 22.6% compared to 18.1% in the second half of 2006. Demand is booming in both the farming and non-agricultural sectors. Individual farmers, with greater confidence in the profitability of the industry, are more reluctant to sell and increasingly entering the market as purchasers.
Londoners, armed with record city bonuses have continued to drive demand for residential farmland. This trend was borne out in the region, with the figures showing that agri-business and institutional investors both increased their share of purchases from 6% to 7% and 1% to 3% respectively.
Chartered Surveyors report that rising demand and increased competition for farmland is also coming from abroad. Britain’s farmland is being bought by Danish and Irish farmers – who are looking to invest here where the prices are still amongst the cheapest in Europe. This combination of different purchaser types is pushing land prices to their unprecedented levels.
The weighted average price of farmland rose to £8,850 per hectare, up from £8 164 in H2 2006. The number of farmland sales in the first half of the year fell by 29%, to be in line with levels from H1 2004. The breakdown of farm purchases by type shows record sales to institutional investors, who doubled their share of purchases from 2% to 4%, and to individual farmers, as sales to them increased by 50%.
Confidence in the outlook for commercial and residential farmland property prices remains very high.
Steve McLaughlin, RICS rural spokesperson in the West Midlands, says:
"The region has seen unprecedented prices being paid for farmland, as much as £12 500 per hectare in some instances. Farmers are competing with investors, foreign farmers and lifestyle buyers for land and this continues to push prices up. In fact, City investors, in the form of hedge funds and pension funds now view farmland as a more attractive option than residential property. While this type of activity has focussed on areas such as the Home Counties, East Anglia and Lincolnshire, there is every indication that it is a trend that is spreading across the country and will hit the West Midlands region."
