UK farmland prices reach unprecedented levels, says RICS survey

Rural land prices in Britain continued to climb during the first half of the year, reaching the highest levels in the survey’s history, according to the Royal Institution of Chartered Surveyors (RICS) rural land market survey.

The farmland market strengthened, with prices rising by 22.6% compared to 18.1% in the second half of 2006, the survey said. Demand is booming in both the farming and non-agricultural sectors. Individual farmers, with greater confidence in the profitability of the industry, are more reluctant to sell and increasingly entering the market as purchasers. Londoners, armed with record city bonuses have continued to drive demand for residential farmland.

Chartered Surveyors report that rising demand and increased competition for farmland is also coming from abroad. Britain’s farmland is being bought by Danish and Irish farmers – who are looking to invest here where the prices are still amongst the cheapest in Europe. This combination of different purchaser types is pushing land prices to their unprecedented levels.

The weighted average price of farmland rose to GBP 8,850 per hectare, up from GBP 8,164 in H2 2006. The number of farmland sales in the first half of the year fell by 29 percent, to be in line with levels from H1 2004. The breakdown of farm purchases by type shows record sales to institutional investors, who doubled their share of purchases from 2 to 4%, and to individual farmers, as sales to them increased by 50%.

Confidence in the outlook for commercial and residential farmland property prices remains very high.

“Rising commodity prices and increased interest in biofuels have resulted in a bit of a feeding frenzy for farmland as farmers compete with investors, foreign farmers and lifestyle buyers for properties,” said RICS spokesperson Sue Steer.

“Although the availability of land increased fractionally in the last half year, supply remains constrained and insufficient to satisfy the appetites of buyers.

“The market is being fuelled by city buyers trying to make the most of low farmland prices, and large bonuses are entrenching these ‘move to the country’ trends. Farmers from Denmark and Ireland are also becoming more visible as they buy up competitively priced land in the UK. “

RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 121 countries. RICS is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. It is also a professional regulatory body approved by Government (HM Treasury).