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Price of UK farmland soars after spike in demand

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The cost of farmland soared to a record high during the second half of 2010 as commercial farmers looked to cash in on rising commodity prices, research suggested.

The Royal Institution of Chartered Surveyors (RICS) said 55% more surveyors reported a rise in demand for commercial farmland during the period than those who saw a fall, as farmers were keen to expand their production, while a balance of 6% more reported an increase in demand for residential farmland.

But the supply of both types of farmland has been falling steadily for the past two-and-a-half years, pushing prices up to a new high.

The cost of farmland sold during the second half of last year, including residential land, rose by 6% to just under £17,000 per hectare, while surveyors' estimates of the value of bare land also increased by 6% to £14,500 a hectare.

The shortage of farmland on the market is expected to drive further price increases during the coming 12 months, with commercial farmland seeing the strongest price growth.

RICS spokeswoman Sue Steer said: "The last six months of 2010 saw further strong gains in farmland prices as commodity prices continued to move upwards.

"Commercial farmers are increasingly keen to purchase prime farmland to expand their businesses and this strong demand is keeping the market very active.

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"This, combined with lack of supply of good-quality land, can only lead to even higher prices over the next 12 months," she added.

"In comparison, the residential farmland market remains relatively subdued, reflecting the broader national housing picture."

All areas of Great Britain saw a rise in farmland prices during the second half of the year, apart from in Scotland, where values dropped by 8%.

The East Midlands saw the strongest price increases at 17%, followed by the north west of England at 12%.

Farmland is now most expensive in the north west of England at an average of £17,300 per hectare, while it is cheapest in Scotland at £9,100 per hectare.


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