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Farmland values to rise again in 2012

Farmland values fell back slightly in the third quarter of the year, but the general direction of the land market is still upwards as investors look to tangible assets.

(Source: Knight Frank, 23 Sep 2011)

The average value of English farmland fell by 1% in the third quarter of the year. This follows a period of strong growth that saw prices hit a new record high.

“According to the Knight Frank Farmland Index, bare agricultural land is 5% higher than 12 months ago and almost double the prices being achieved five years ago,” says Andrew Shirley, the firm’s head of rural research. “In terms of capital appreciation, farmland has outperformed many other asset classes over both the short and long term. The FTSE 100, for example, has lost around 10% of its value in the past three months alone and has grown by a miserly 6% in the last decade,” he adds.

So why have farmland values weakened slightly now and is it the start of a longer-term trend? Clive Hopkins, head of Knight Frank’s Farms and Estates team, thinks not. The market is becoming increasingly polarised with land that attracts competitive bidding due to its location or quality still achieving very strong values.

Prices are likely to remain flat or weaken slightly in the final quarter of the year, but will rebound in the first half of 2012, he predicts. “The general direction of the land market is still upwards as investors look to tangible assets supported by strong fundamentals.”

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