Agricultural land value growth over the long term exceeded residential house prices, FTSE 100 and 10 year gilt yield, says the snapshot report from Chesterton Humberts.

The firm says that sustained buyer demand and limited availability is driving price growth and farm land values are set to rise by 6% per annum over the next five years.

The report reveals that a number of encouraging positive indicators have driven land values to reach new record levels, exceeding equities and national house prices in the long term.

Despite extreme weather conditions and a stagnating economy, farmland values in Southern and Eastern regions saw strong growth during 2012, with national figures ending the year at an average of £21,053 per hectare and £8,520 per acre.

Southern and Eastern regions saw strong growth in arable land values, notably Eastern areas with an increase of 16.2%, the South East up 15.4% and the East Midlands up 14.8%.
 
Meanwhile, long term growth shows figures have quadrupled since 1995, outpacing national house prices at 160.2% and the FTSE 100 at 92.4%. Agricultural rents also experienced healthy growth reflecting the uplift in land and commodity prices.

Andrew Pearce, head of Rural Agency puts this increase down to a shortage of available land and strong buyer demand. ‘Commercial farmers are taking advantage of rising food commodity prices whilst investors view the growing population, rising food demand and limited supply of land as a solid long term investment opportunity,’ he said.

According to David Hebditch, head of Chesterton Humberts' rural division, investors are increasingly showing a greater appetite for assets which exhibit good growth potential and are tax efficient.

‘Despite the recent adverse weather conditions, there is a compelling long term case for investing in farmland as the attractions of the sector with regard to scarcity value, rising food demand and tax advantages are set to continue for the foreseeable future,’ he said.

‘The increasingly unpredictable global weather conditions will likely exert upwards pressure on food commodity prices as well whilst new technology will create longer term greater efficiency and cost savings,’ he explained.

‘We are quite bullish about medium term growth in farmland values given the likely supply/demand imbalance and have predicted that farmland values will rise by 6% per annum over the next five years, with larger good quality parcels capable of comfortably exceeding this,’ he added.

The report also shows there are, however, regional variations. While the Eastern region recorded the highest growth in arable land values at 16.2% and for pasture land at 13.6% in 2012, Wales posted the biggest decline for both.

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