Prices for farmland continue to rise

Friday, 16 November 2007 12:00 AM

Prices for farmland have continued to rise in the UK over the past three months, driven by an increase in demand and reduction in supply, according to estate agents Knight Frank.

Average prices were up 33.2 per cent in the year to September, recording the second consecutive quarter of record annual growth.

Prices rose ten per cent in the three months to September alone.

An acre of farmland now costs £4,178, up from up from £3,137 a year earlier.

The increases are all the more pronounced given the recent foot & mouth and blue tongue outbreaks in England, which have reduced yields on land.

However, an imbalance in supply and demand in the market has counteracted this and forced prices ever higher.

While applicants to purchase land increased by 12 per cent in the year to September, supply rose by only three per cent - down from the previous quarter figure of eight per cent.

Up to 2.5 per cent more acres were sold in the three months to September during 2007 than in the comparative period during 2006.

Lifestyle purchases have been a key component of this growth, now accounting for 38 per cent of the market.

Demand for country estates, for example, have been strong in areas west of London.

Residential prices in some top-end areas of the capital have been increasing by 40 per cent annually, creating a large amount of equity for investment - contributing significantly to additional demand and underpinning price competition.

The rest of the market was composed of individual farmers, buying 32 per cent of the land, followed by agribusiness (11 per cent), institutional investors (11 per cent) and developers (six per cent).

Knight Frank estimates 15 per cent of land was purchases by overseas buyers, with Dutch, Irish and Scandinavian buyers among the biggest buyers.

In terms of sales, individual farmers were responsible for 61.4 per cent of sales, followed by lifestyle buyers and agricultural businesses, with 18.6 per cent and 10.8 per cent respectively.

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