Skip to content

English farm land set to rise by 5% in 2013 says Knight Frank

Average farmland values in England were £6,214 an acre in the final quarter of last year and are now expected to rise by around 5% in 2013.

It means that land has proven to be a good long term investment. In the last five year values have increased by over 50%, in a decade they have increased by 200% and in the 60 years prices have risen almost 11,500% from just £54 an acre.

‘English farm land’s Bull Run is not yet over, despite the impact of the horrific weather on farming profitability this year. The market proved resilient in 2012 and is predicted to gain further ground next year,’ said Andrew Shirley, head of rural property research at Knight Frank.

Unsurprisingly, given the summer washout that badly affected harvest, all of the growth in farmland values came in the first half of the year. Prices remained virtually flat in the second six months.

Shirley pointed out that a fall in the supply of good farms for sale, coupled with an increase in demand from private investors, helped to keep prices stable. ‘We expect values to increase by around 5% next year. More land may come to the market as some more highly geared producers with one bad harvest in the barn and another in the ground decide to call it a day. However, there is unlikely to be the kind of glut that could pull back prices,’ he explained.

‘An increase in availability, particularly of good blocks of arable land, could actually benefit the market with more stock for potential buyers to choose from and bid on,’ he added.

However the national figures mask strong regional variations. Areas like the Cotswolds that are attractive to buyers from outside the locality are likely to remain hotspots, but in areas where demand is mainly driven by neighbouring farmers, smaller, less productive parcels of land could prove harder to sell.

The recent confirmation by the taxman that character appropriate farmhouses will not be hit by the new annual charge on £2 million plus residential properties owned by companies will also settle the nerves of some contemplating a purchase.

‘If farming hadn’t been given relief from the tax, designed to clamp down on Stamp Duty Land Tax avoidance, it would have affected farming partnerships where one of the partners is a company, and also overseas buyers who often use a corporate structure for their purchases,’ said Shirley.

‘It has also recently been announced that the on-going reforms of the Common Agricultural Policy (CAP) will not now be implemented until 2015, a year behind schedule. This delay should not affect the farm land market as it seems likely that the current system of farm support payments is likely to remain, albeit with a greater emphasis on the delivery of environmental benefits,’ he added.

Clive Hopkins, head of Knight Frank’s farms and estates department described 2012 as a year of many uncertainties and interruptions. ‘The backdrop of global recession, threat of multiple tax changes that might impact on the benefits of buying and owning land for both national and international buyers, a poor harvest, a poor drilling season and rising input costs as well as the Olympics all caused the understandable diversion in the market,’ he said.

‘This aside, there has been a market, although the regional variations in prices have never been more evident. The best sales have been those that came to the open market. With the backdrop of the above, many purchasers have sat tight, not wanting to commit and certainly not wanting to do anything without the comfort of competition,’ he explained.

‘Looking forward to 2013, there are purchasers who would now like to do something.  Therefore, we consider that the market may move very positively in the first and second quarters of 2013. Uncertainties and interruptions behind us create a clearer future and this is no more demonstrated by the appearance of agricultural investors in the market,’ he said.

‘Buyers looking for investment opportunities for both medium and long term will add further momentum and impetus to the market. Capital growth opportunities remain and this will attract national and international interest. We look forward to 2013 and the anticipated market bounce,’ he added.

Related