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Farmland shows resilience to recession

Last year, according to the latest edition of Savills Agricultural Land Market Survey investment was cited as the primary reason for buying in 29% of all transactions, up from 16% in 2007.

This additional interest from investors helped to push average arable land values up by 15.5% and average pasture values up to 28.4% although most of this growth was confined to the first half of the year.

Ian Bailey Savills research comments, "The period of exceptional growth in values appears to have stalled for the time being but historically farmland has remained fairly resilient to recession with any fall in values limited".

Forecasts for 2009

We expect average values to stabilise this year, dipping during the first half by up to 5% and regaining lost ground in the second half.

Debt, as a reason to sell, is unlikely to be a significant factor; interest rates are likely to stay low and although profitability may dip it should remain above 2006 levels.

A more distinct two-tier market is expected with good quality, well equipped, well located and commercially viable farms commanding the higher prices.

We see no reason for the supply of farmland to change significantly from the volumes recorded during the past few years; an average of 186,000 acres have been publicly marketed each year for the past three years, though we expect a later market.

Overseas buyers will continue to be a significant and important source of demand. Their presence in the market this year will be further enhanced by the weak performance of sterling against other currencies.

Christopher Miles comments, "In the East we have kicked off the New Year with renewed interest in farms from UK and overseas investors but with very little land available compared to this time last year demand is building. I remain positive for the outlook for prices of good arable and with the prospect of a late market it may be a case of the early bird catching the worm".