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Residential farmland property in the UK sees demand fall

The latest Rural Market Survey from the Royal Institution of Chartered Surveyors shows that the loss of jobs in the highly paid financial sector in London has had a severe impact as these kinds of buyers are no longer looking.

The net balance of chartered surveyors reporting a decrease in demand for residential farmland fell from -3% to -64% in the second half of 2008. Demand has fallen drastically since last year when the net balance was a positive 50%.

Also the net balance of surveyors expecting price rises in residential farmland fell from -25% to -79%. There is an expectation that lifestyle buyers will continue to retreat while the challenging financial climate persists.

However, demand in the commercial sector has fared better with the net balance falling slightly into negative territory. UK banks have become more willing to lend to the agricultural sector over the past year but anecdotal evidence suggests that both Danish and Irish investors have withdrawn from the market and a reversal in commodity prices have been a factor in the drop in demand, the report says.

'The downturn in the economy has made many from the financial services sector re-think their life-style priorities, putting an end to city expansion into rural areas,' said RICS spokesperson Sue Steer.

'Prices for farmland peaked in the first half of 2008 and lower commodity prices and an uncertain financial climate could push prices lower in the first half of 2009,' she added.

Surveyors are pessimistic about the outlook for farmland prices. In the non-residential sector, 42% more chartered surveyors expect prices to fall rather than rise, the lowest recorded level since 2003. In the residential sector, the net balance reached the lowest level in the survey's history with 79% chartered surveyors expecting prices to fall.