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Farmland Prices Increase 19% - RICS Rural Land Market Survey H2 2011

Farmers drive up land prices on back of strong commodity prices and easier access to finance.

(Source: RICS Rural Market Survey H2 2011, 24 Feb 2012)

  • Farmland prices reach a record high in H2 2011
  • Demand is being driven by commercial farmers
  • Evidence banks are lending more freely to the agricultural sector to finance land purchases

The H2 2011 RICS Rural Land Market Survey shows farmland prices reached record highs and highlights the growing disconnect between the flagging residential farmland sector and booming commercial arena. Indeed, price increases are being driven almost entirely by commercial farmers and while the outlook for prices is still very positive in this segment of the market, it has turned slightly negative in the residential sector.

The survey’s ‘transaction’ based measure of farmland prices increased by 11% in H2 alone resulting in an annual gain of 19%. The survey’s ‘opinion’ based measure (which is an estimate of the hypothetical value of pure bare land by surveyors) increased by 7% in H2 taking the annual increase on this measure to 11%. This variation may be partly explained by their different respective methodologies.

Residential farmland demand was relatively flat during H2, in line with the broader national housing market. However, demand for commercial farmland remained strong. Surveyors note that farmers remain keen to expand production on the back of relatively elevated commodity prices. Moreover, there is some anecdotal evidence to suggest banks are lending more to the agricultural sector, which is supporting farmers’ expansion plans.

All regions in England experienced gains in bare land prices apart from the North East. The strongest land price increase was in the West Midlands, with an impressive rise of 18% in H2 alone, making the West Midlands on average, the most expensive farmland in Great Britain.

Looking ahead, surveyors expect the current trend to continue i.e. strength in the farmland sector and weakness in the residential arena.

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