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Demand for land is outstripping supply

What will happen to land prices over the next five years when demand is increasing and supply of land appears to be decreasing?

(Source: Farmers Guardian, 11 Dec 2009)

Demand for land is outstripping supply, according to land agents Robinson and Hall.

Sales manager, Fiona Stacey, says: “We currently have 340 active applicants registered to purchase land within Bedfordshire, but we are not seeing enough land coming to the market to meet this demand.”

Ms Stacey questions what will happen to land prices over the next five years when demand is increasing and supply of land appears to be decreasing. She believes land prices are set to rise significantly.

The RICS reported demand for commercial farmland rebounded during the first half of 2009, while residential farmland demand continued to fall sharply, with surveyors reporting large-scale commercial farmers keen to expand production, particularly to neighbouring farms.

However, foreign demand particularly from Irish farmers, is reported to have dried up. On the residential side, lifestyle buyers continue to withdraw.

Supply continued to fall sharply in both sectors, indicating neither commercial farmers nor lifestyle owners are under sufficient financial pressure to sell.

As a result, commercial farmland prices (bare land) remained broadly flat during the first half of 2009, whereas farmland containing residential property has seen prices fall. Signs of recovery have appeared in the marketplace over recent months, showing buyers’ confidence has been on the up.

Low interest rates

The Agricultural Mortgage Corporation has seen its lending to agriculture increase by 19 per cent on the year to the end of September 2009, which shows farmers looking to strengthen businesses at a time of comparatively low interest rates.

David Jones, who heads Robinson and Hall’s agency department in Bedford said: “We are currently experiencing growing variation in land prices achieved, perhaps due to increasing caution from a smaller number of potential bidders.”

So why is the number of applicants increasing when the number of potential bidders is getting smaller? Chris Leney, partner in charge of the firm’s Ipswich office, added: “Supply still remains tight in the area. The few blocks of land which have found their way to market have been strongly contested.

Ms Stacey adds: “There is still a significant proportion of buyers with cash to invest. Low interest rates are forcing cash-rich buyers to look at alternative methods to get a long-term return on their investment.”

Buyers are looking for well-positioned land with good access.

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