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Farmland values to hit new record high in England

The average value of English farmland is 7% higher than 12 months ago.

(Source: Knight Frank, 07 Jul 2011)

Headlines:

Farmland values rose by almost 3% in the second quarter of 2011 and are now just under 7% higher than they were 12 months ago

This average price of English farmland hits new record high

Farmland continues to outperform other asset classes

Strong regional and local differences are starting to emerge

Andrew Shirley, head of Knight Frank rural property research, comments: “The value of farmland in England rose by 2.8% in the second quarter of the year, a similar amount to the growth seen in Q1. This means average prices are now 6.7% higher than they were 12 months.

“A shortage of good farms for sale and strong demand from farmers, investors and lifestyle buyers have helped push up prices. There are, however, signs that the market is starting to flatten and we expect further growth to remain relatively steady for the rest of the year.

“Although prices for agricultural commodities such as wheat did hit record highs during the spring, markets are becoming increasingly volatile. Efficient farming businesses are still keen to expand, but are being relatively cautious at the moment, especially as interest rates are expected to rise later this year or in early 2012.”

Tom Raynham, head of Knight Frank’s farm sales, comments: “Demand is still outstripping supply and this has helped support farmland values in the first six months of the year.

“A thousand acres of land in Worcestershire has been sold privately to an investment buyer who is expanding their portfolio into agricultural land. They were attracted by the strong capital growth of the past decade and predicted further rises over the next 10 years. We have a number of other investors on our books looking for suitable properties.

  3 months 12 months 5 years 10 years
Farmland 3% 7% 106% 208%
Prime London Houses 3% 8% 51% 100%
UK House Prices 3% -1% 1% 90%
FTSE 100 -3% 17% -1% 2%

“Although we may see the market flatten during the rest of the 2011, we believe that prices will continue on a steady upwards trend. The long-term outlook for commodity prices looks bullish and we are not expecting a huge increase in the availability of the type of agricultural property that will really appeal to investors and the most efficiently run farming businesses.”

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