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Farmland prices set to rise by 10% in the first half of 2012

Farmland prices continued to edge downwards slightly in the final quarter of the year, but are expected to rebound in the first half of 2012.

(Source: Knight Frank, 21 Dec 2011)

English farmland prices rose on average by a modest 4% during the year, following consecutive drops of almost 1% in each of the final two quarters. However, farmland prices remain close to record levels.

“According to the Knight Frank Farmland Index, bare agricultural land is about treble the price being achieved 10 years ago,” says Andrew Shirley, the firm’s Head of Rural Research.

“Although annual growth of just 4% might be considered slightly disappointing compared with farmland’s recent performance, it is still robust given the economic situation facing the UK and global economies. Stock market performance, for example, has been far more disappointing during the year,” he adds.

“At the end of Q3 when farmland prices fell by 1% we predicted that the farmland market might weaken slightly more before the end of the year, so this quarter’s drop of 0.8% comes as no surprise.”

But farmland prices look set to bounce back in 2012, says Clive Hopkins, Head of Knight Frank’s Farm and Estate Sales team.

I think that farmland prices will rise by 7-10% in the first half of 2012, and then remain steady for the rest of the year as an increase in supply pegs back growth.

“We also expect investors to remain interested in farmland. It is becoming more well-known as an asset class with a proven track record of capital growth. Unlike many other investments, it can also offer lifestyle opportunities that can be enjoyed, as well as a decent income.”

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