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Year on year, land prices up 15%

The average value of farmland in England has risen by 12% so far in 2014, according to the latest results from the Knight Frank Farmland Index.

(Source: Knight Frank Farmland Index Q3 2014, 13 Oct 2014)

Land Performance

  • +2% over 3 months
  • +15% over 12 months
  • +55% over 5 years
  • +187% over 10 years

Land prices increased by a further 2% in the third quarter of the year, building on the 9% growth seen during the first half of 2014.

Year on year, land prices are up 15%. This means farmland has outperformed most other major asset classes, including the UK housing market (+10%), the FTSE 100 (+5%) and gold (-9%).

Limited Supply

The amount of publicly advertised land is down 15% compared with 2013 and the on-going demand from both farmers and investors continues to push up land prices.

Despite recent falls in the price of agricultural commodities such as wheat and milk, farmers are still focused on the longterm and are keen to acquire neighbouring or nearby land when it becomes available.

With house builders increasing their output and acquiring more development sites, the number of farmers with roll-over funds to spend on land is growing. As land is acquired for the controversial HS2 scheme this could also bring new buyers into the market.

Investors’ hunger for land remains undimmed, as highlighted by the recent purchase of the Co-op farms portfolio for almost £250m by the Wellcome Trust. Part of the problem for investors, particularly funds, is the lack of suitable investment-grade land available, combined with strong competition from existing landowners.

Although large tracts of arable land with relatively little value tied up in high-value period farmhouses are selling quickly, the market for estates with large residential properties is less fluid, according to Clive Hopkins of Kinght Frank.

In some instances, this has led to large chunks of an estate’sland being sold off separately for a premium price. “I think this trend really highlights the strength of the farmland market,” says Clive. “Traditionally it has been the house leading the sale, now often it is the land.”

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