Price of farmland reaches record high

The rising cost of farmland in the South West, which has reached record highs, has been partly attributed to a rising demand for residential, ‘lifestyle’ farms.

The average price for farmland in England and Wales, which in 2012 stood at £6,783 per acre, has now risen to £8,607 an acre, according to the latest RICS/RAU Rural Land Market Survey.

This represents a rise of nearly 27 percent in two years, with land prices 8.4% higher than this time a year ago.

Farmland now costs nearly four times the amount as when RICS first began recording regional rural land market data in 2003 (when land in the region cost £2,169 per acre).

Although this increase has been driven primarily by industrial farmers, demand has been pushed up by an increase in land being purchased for ‘lifestyle farms’. Buyers relocating from the South East and seeking a change of lifestyle are more active now than they have been for many years.

This continued demand was met with a downturn in land availability. Respondents to the 2012 survey reported a fall in supply of commercial farmland. In contrast, residential farmland saw a rise in available land, with 46 per cent more surveyors reporting an increase rather than decrease. In the last twelve months, 53% more chartered surveyors reported rises, rather than falls.

While interest from potential buyers has now seen substantial rises since the end of 2008, the imbalance between supply and demand in the South West appears to show no sign of waning. In the face of growing concerns around housing shortages and burgeoning populations, investors increasingly are seeing land as an economic safe haven.

Senior Economist of RICS, Joshua Miller, said: “The latest data shows that growth in demand for farmland continues to outstrip that of supply and this is pushing up prices and supporting expectations for further increases over the course of the next twelve months.

“Demand remains very strong on the commercial side, particularly from farmers keen to expand production onto neighbouring plots.

“Significantly, however, there has been a revival in residential or ‘lifestyle’ demand, which only began to start growing at the end of 2013 having been more or less flat since 2008. This coincides with the broader turnaround in the UK housing market.”

With the recent upturn in the UK’s economy, the demand for residential farmland looks set to increase, and in turn push up prices. Those looking to benefit by selling residential land could profit, while the potential price rises could make life difficult for new farmers.