Farmland prices soaring at fastest rate on record

Published 28th Jul 2008

The price of UK farmland rose at its fastest pace on record in the first half of this year as commodity prices continued to reach new highs, according to a Royal Institution of Chartered Surveyors survey released today.

The average price of farmland surged by 24% in the first half of 2008 to reach £12,965 a hectare (2.5 acres) - the biggest increase since the survey began in 1995, the Rics rural market survey showed. Prices soared 47% year on year.

When broken down by land type, the hectare price of arable land jumped by 32% in the first half of this year to £14,453, while pasture land rose by 16% to £11,477.

Yorkshire and Humberside saw the greatest increases. Land prices rose 64% on last year's levels, compared with a 26% rise in the previous six months. This was closely followed by the East Midlands , where the average price of land rose 61% on a year ago, compared with 28% for the last half of 2007. Scotland saw the smallest increase, with the average price of land rising 20%, compared with a 34% rise in the previous half.

These rising prices are putting wealthy City bankers and business people off buying land or property in the countryside. Purchases by non-farmers, including "lifestyle buyers", fell by 10% during the first six months of this year to account for just 27% of all land changing hands. Rics believes that lifestyle buyers will continue to retreat while the challenging financial climate persists.

Instead, farmers and agricultural businesses were again the dominant buying force, as surging commodity prices are continuing to prompt farmers to expand their production.

Rics said demand for residential farmland fell for the first time since 2005. The number of surveyors reporting an increase in demand for residential farmland in the first half of 2008 fell to -3%, from 50% in the previous six months.

Surveyors now expect residential farmland prices to start falling following the drop in demand, with 25% more expecting price falls than those who think prices will rise. There is also an expectation that the growth in the price of all types of farmland will have peaked during the first half of this year.

Soaring commodity costs have pushed input prices upwards resulting in marginal farms becoming unprofitable. Oil rose to a record high of $147 a barrel earlier this month. The rising costs of animal feed and transport are making it increasingly difficult for farmers to remain solvent.

As a result, surveyors expect a number of small commercial farmers to find they are unable to carry on, leading to an increase in the amount of land coming on to the market.

Julian Sayers, at Rics, said: "Ever-rising commodity prices have pushed the price of farmland to record highs as farmers and investors compete for arable land. However, the days of the lifestyle buyer are on the wane. The credit crunch is putting an end to City expansion into the country as the precarious financial situation has made city slickers rethink their lifestyle priorities."

Source: ' guardian '

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