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Two tier farm land market emerges in UK

This comes on top of a 2.7% rise in the first three months of this year. It means that the average value for an acre of grade 3 arable land is now £5,900, which is almost a 200% increase on the value a decade ago.
‘This average half year growth of 6% accounts for nearly two thirds of the growth forecast for this year. We expect growth rates to slow during the second half of this year as the market become increasingly polarised, with a strengthening correlation between values and land type, quality and location,’ said Ian Bailey head of Savills rural research.

In the east, arable land continues attracting significant interest, which is reflected in the region achieving the strongest quarterly growth, whereas in the South West of England grassland values increased the most.
‘There are some good sales taking place but sensible and realistic pricing is extremely important in order to generate competition. The market is showing signs of becoming two tiered and where land is not of the best quality, where there are no interested neighbours, or there are significant blights, farms can take longer to sell,’ said Alex Lawson director of Savills.

‘In addition to farmers, investment buyers are around for the right proposition and amenity estate buyers are returning. We have seen more open market sales than private deals so far this year,’ he added.

In Scotland, average values have remained unchanged since September 2010 at just over £4,000 per acre. This is largely due to the lack of land marketed during the first five months of this year, says the report. With a strengthening of supply and an increase in buyers reported since May, it is extremely likely values will change during the second half of the year.

Supply in England during the first half of this year was 19% up on the same period of last year and accounted for 73% of the farm land marketed across the UK. During May alone, 32,930 acres of farmland were publicly marketed and according to Savills this is the most land advertised in one month since September 2008. In an historical context however, the supply of land marketed is still significantly below 2000 levels.

Analysis of farm transactions which took place during the first half of the year, where Savills acted for the seller or buyer, suggests there is renewed interest from new non farming lifestyle buyers. They represented about a third of all buyers compared with less than a quarter in 2010.

Farmers remain the dominant buyer with farm expansion continuing to be the principal reason for a purchase. So far this year, there has been little interest in UK farmland from overseas buyers, who became net sellers.

‘While we expect supply to remain tight and the existing fundamentals driving the market to remain intact, there are potential pressures, which may affect the future rate of growth for farmland in some sectors,’ the report says.
‘These include the continued difficult economic climate and austerity measures, the volatility of farm input and output prices, which directly affect profitability and the current reforms of the Common Agricultural Policy,’ it adds.