This means the average price of agricultural land in England is now almost £6,000 an acre, a record high. Farmland has performed far more strongly than many other asset classes over the past 10 years.
‘This resilience is part of what makes farmland so attractive as an investment and should help ensure values continue to rise steadily during 2011. When you look at the performance of other investments, such as the FTSE 100, the farmland market has been far less volatile and survived the credit crunch in much better shape. That hasn’t been lost on private investors and we have noticed a lot more interest in good quality arable land and farms, especially now that commodity prices have also started to increase,’ said Tom Raynham, of Knight Frank’s farm sales team.
‘Wealthy individuals have always enjoyed owning land because of its amenity value, tax planning benefits and as a long term hedge against inflation, but now they are also starting to look more carefully at its potential to generate an annual return as well,’ he explained.
‘Demand also continues to outstrip supply with relatively few potential sellers keen to test the market at the moment. Ironically, we have buyers across the country crying out for good properties. If interest rates rise it will be interesting to see whether more farms are put up for sale, but at the moment there are no signs of any significant increases this year,’ he added.
Clive Hopkins, head of farms and estates sales, said that a shortage of supply is also affecting the market for country estates, despite the current economic uncertainty. ‘We still have a number of clients prepared to spend a lot of money on a really good estate. But at the very top of the market there isn’t really enough choice to draw buyers into the market. This makes people nervous about making an offer; they need the confidence of knowing that others are also making bids at similar levels,’ he explained.
Earlier this week the Savills Farmland Value Survey showed that across Great Britain average grade three arable land recorded growth of 2.3% during the first quarter of 2011 with the Eastern regions of England recording the strongest growth in values of 5%.
It said that continued demand combined with a further reduction in the volume of available farmland has resulted in the best first quarter growth in farmland values in the UK since 2008.
This continued demand is supported by the number of new applicants registering to buy farmland, which were 16% up during the first quarter of this year compared with the same period of 2010, it added.
