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Farmland values expected to rise by 36% in the next 5 years

Five-year growth for UK farmland values forecast to outperform the traditional alternatives.

(Source: Savills, 20 Dec 2011)

The capital value growth of UK farmland is forecast to outperform many commodities markets, residential property, UK gilts and West End offices, according to the latest research from Savills rural research. Experts expect the average value of farmland to increase by 36% in the next 5 years. More immediately they are predicting average growth of 5% for next year.

This forecast growth follows a substantial rise in average farmland values over the past five years (138%) which was significantly greater than that recorded for either residential or commercial property or equities. The medium term prospects for UK farmland values in terms of capital growth are extremely positive.

Alex Lawson Director of Savills Farms and Estates comments, “Against a backdrop of economic uncertainty the farmland market is likely to become more diverse in terms of performance, we expect the continuing tightened supply and low interest rates to maintain farmland values for all but the worst quality land.”

Savills' forecast for next year follows more muted growth than originally expected for 2011. They predicted an average growth of 9.7% for all land types in 2011, whereas the average was 5.7%, which included a stalling in growth during Q4 for all regions except Scotland and the east of England. This average however, masks the strong demand for the best arable land which recorded growth of 8.9%.

In terms of supply the area publicly marketed in England was up 10% on 2010 at 116,000 acres. There were clear regional variations with increases in supply recorded for the East of England, the East Midlands and the South East. It is interesting to note that despite the 10,000 acre increase in supply across the eastern counties, the values for the best land in these counties continued to rise significantly.

Lawson added, “Farmers continued to be active buyers particularly when the opportunity to buy a neighbouring block of land arose. There is also undoubtedly demand for the best sporting/residential estate from the amenity buyer, the biggest issue has been the lack of property to buy.”

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