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Farmland Price Outlook Remains Upbeat - RICS Rural Land Market Survey H1 2013

The H1 2013 RICS Rural Land Market Survey highlights the continued appreciation of farmland prices during the first half of this year, driven primarily by commercial demand.

(Source: RICS Rural Market Survey H1 2013, 23 Aug 2013)

  • Farmland prices continue to grow firmly
  • Commercial farmers are driving the market
  • Prices are expected to rise further over the coming 12 months

The survey’s transaction based measure of farmland prices (which includes the value of on-site residences if they account for less than 50% of the total value of the sale) rose by around 5% over the period. The opinions based measure (which is a hypothetical estimate by surveyors of the value of pure bare land) of farmland prices increased by around 10%. The variation between the two can be partly explained by their different methodologies i.e. the residential element in the transactions based measure is likely to increase average per acre prices.

Price increases are being driven predominately by commercial farmers, who remain keen to expand production. Nevertheless, the strength of commercial farmland demand is not broad-based. Indeed, surveyors note that farmers in the main are discriminating in favour of large, top quality, neighbouring plots with as small a residential component as possible. As such, there is considerable price dispersion, even in the same areas; plots that are smaller and of lower soil quality are attracting much less interest and achieving lower average per acre prices.

Residential (or ‘lifestyle’) demand continues to trend sideways, though surveyors note it remains supported by a number of factors. These include farmland’s relatively favourable tax treatment and its perceived ‘safe haven’ status.

Looking forward, surveyors are very optimistic about commercial farmland price prospects over the next 12 months.

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