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Farmland Prices Reach Record High
RICS Rural Land Market Survey H2 2010

Farmers bid up land prices to record high; surveyors expect this to continue

(Source: RICS Rural Market Survey H2 2010, 23 Feb 2011)

  • Farmland prices reach record high
  • Farmers keen to expand production
  • Surveyors expect price rises to continue

The RICS Rural Land Market Survey shows farmland prices reached an all-time high in H2 2010. This comes on the back of strong growth in demand – mainly from commercial farmers – and falling availability of land for sale offered in the market. Anecdotal evidence from surveyors indicates that commercial farmers are especially keen to expand production in order to capitalise on elevated commodity prices. Meanwhile, surveyors note that the residential farmland sector is experiencing more subdued growth in demand similar to the broader national housing market. Over the next twelve months, surveyors expect the recent trend in farmland prices to continue; strong growth in the commercial farmland market but a flatter trend in the residential sector.

Both transaction and opinion based measures of farmland prices increased by around 7% during H2 2010. Both prices are new all-time highs recorded by the survey.

All regions within Great Britain experienced rising bare farmland prices apart from Scotland, where prices fell by 8%. The strongest price increases took place in the East Midlands, North West and the Eastern region (at 17%, 12% and 11% respectively during H2). At the end of 2010, the most expensive farmland was in the North West, while the cheapest was in Scotland.

Demand continued to grow more strongly in the commercial farmland sector than in the residential area; the net balance in the former was +55 on the latest reading, compared to only +6 in the latter. This marks the fourth year running where the pace of demand in the commercial farmland sector has outperformed the residential arena. As a result, commercial farmers’ share purchases increased to 65%, while residential buyers’ share fell to 23% (both record figures). Further support to prices was provided by continued falls in land availability; this has been falling in both the commercial and residential sectors for two and a half years.

Surveyors remain generally optimistic about the trend in farmland prices over the next 12 months, particularly in light of the supply situation. Moreover, given strong growth in commercial farmland demand, it is unsurprising that surveyors are relatively more upbeat abut future developments in this segment of the market.

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