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Demand Pushes UK Farmland Prices to Record Levels

01 March 2012

UK - Surging demand for commercial farmland saw prices reach record levels for the third consecutive period, says the latest Royal Institution of Chartered Surveyors (RICS) Rural Land Market Survey, H2 2011.

The average price per acre increased to £6,514 during the second half of the year. Farmland has now almost doubled in value in the last five years.

This dramatic jump was driven by growing interest from commercial farmers, looking to expand their enterprises in order to capitalise on the strength in commodity prices.

A net balance of +53 per cent of chartered surveyors reported an increase in demand for commercial land over the previous twelve months, while demand for residential farmland remained flat (-4 per cent).

A significant imbalance between supply and demand was once again evident, as land availability dropped off in the final six months of 2011.

One per cent more surveyors reported a decrease rather than an increase in (non-residential) supply coming on to the market.

According to chartered surveyors, all areas of Great Britain experienced rising farmland prices during the final six months of 2011, with the exception of the North East and Scotland.

Significantly, farmland in the West Midlands saw the strongest increase in price.

Given the imbalance between supply to the market and demand from potential buyers, surveyors predict the recent trend in farmland prices to continue over the coming twelve months. Respondents expect the strong growth seen in the commercial farmland market to persist (net balance +36) while expectations are somewhat more cautious for the residential land sector (net balance -9).

"Land prices reached record levels once again towards the end of 2011, as commercial farmers looked to capitalise on increasing commodity prices by expanding their businesses. With demand continuing to surge ahead and a seemingly low level of land coming onto the market, it is easy to see why prices continued to rise so sharply across most of the country," said Sue Steer, a spokesperson for RICS.

"Furthermore, it would seem that this trend is set to continue over the next twelve months. However, the outlook is slightly more mixed for farmland which is more geared towards the residential sector, reflecting the broader national housing picture."

TheCropSite News Desk

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