Farmland prices increasing despite housing market slowdown

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by Kay Murchie

Farmland prices are on the increase according to estate agent Knight Frank. In the first quarter of this year, prices increased by 12% as a thriving agricultural industry drives demand.

Knight Frank’s research also discovered that a growing amount of land is changing hands for much more than the average price and said good arable land was regularly exceeding £6,000 per acre in spite of the slowdown in the housing market.

Andrew Shirley of Knight Frank said the UK farmland market not only continues to shrug off the credit squeeze affecting other property classes, but continues to grow in value at a phenomenal rate.

The main reason for the growth is an increasing amount of potential buyers battling for a limited supply of land, added Mr Shirley. Demand had risen by almost 19% over the last 12 months, while supply has flatlined, he said.

According to Knight Frank, farmers and agricultural businesses made up for 57% of purchases, with Irish and Scandinavian farmers tempted by land that even at today’s high prices was cheaper than in their own countries.

29% of land went to lifestyle buyers while farmers and agricultural businesses are now the dominant buying group, accounting for almost 60% of purchases, said Knight Frank.

Furthermore, an increasing amount of investors, either private or as part of a fund, are also looking into purchasing UK farmland as the cost of crops increases but increased competition meant their chances to buy were limited.

Their presence in the market is an example of the serious amounts of money being invested in agriculture around the world. While this trend continues, and analysts are predicting an extended bull run for soft commodities, UK farmland values should continue to benefit, concluded Mr Shirley.