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Farmland prices continue falling in England

The average price of farmland is now £4673 per acre, just over 1% higher than it was 12 months ago, the Knight Frank Farmland Index shows.

Analysts expect demand and prices to firm up by the end of the year and point out that the availability of farmland is still low. The report shows that the rate of decline has slowed significantly since the final three months of 2008 when values dropped by 5.2%.

'Values have now fallen in three consecutive quarters, the first time this has happened since 2000, but the slide needs to be put into context. Prices are still up slightly on an annual basis, 1.1%, following exceptionally strong growth in the first half of 2008 and the agricultural land market certainly remains more resilient than other property sectors,' said Andrew Shirley, head of rural land research at Knight Frank .

He points out that average farmhouse values, for example, have fallen by almost 20% during the same period.

'The fact that farmland has not fallen so much, despite commodity prices halving and lifestyle and investor buyers stepping back from the market, says much about its strength. A lot of this derives from the limited availability of farmland for sale,' he added.

Although there will be some forced sales this year, these will mainly be farming businesses that have over extended themselves by diversifying outside core agriculture, Knight Frank believes. 'The majority of farmers are well used to weathering periods of poor prices and there is unlikely to be a glut of land for sale this year,' explained Shirley.

Overall the property consultants expect that prices may weaken marginally in the next quarter, but investors, farmers and a small number of residential buyers will return to the market by the end of the year. 'This extra demand should ensure values level off again. If commodity markets improve prices could start to rise again as early as the final quarter of this year,' concluded Shirley.