Farmland values growing
Posted on 19th August 2010
The farmland market reached a record high as average bare land prices hit £5,000 an acre for the first time.
The reason is simply supply and demand. Prices continue to rise as the supply of land to buy remains low and demand remains strong – particularly from farmer buyers.
The lack of supply driving up competition is becoming a vicious circle. Before the 1990s around four per cent of land would be sold in a year – so on average farmers knew that there would be an opportunity to buy neighbouring land once every 25 years or so. Now, as the volumes of land traded have dropped so much, the opportunity might only happen once in a lifetime.
Bare land prices rose to £5,100 per acre, up six per cent between April and June, and are now up 7.5 per cent over the last year. This continues a three year trend of rising prices. 7,500 acres were for sale in the quarter, 17 per cent less than in the same period in 2009 (9,000 acres).
The strength of the market for land is highlighted by the relative weakness of the market for farms with houses and buildings. While bare land values have risen 7.5 per cent in the past year, the value of equipped farms has only risen by two per cent. This is because of the weakness in house prices which are often a major element of the value of a farm and non-farmer buyers being more affected by the recession. Buying the ‘average’ lot of bare land costs around £700,000 (for 139 acres) while the average farm with house and buildings is £1.8m.