Allen Maunder, of Oxford University’s Institute of Agricultural Economics, has for many years been a respected commentator on land value statistics. It was with his help and encouragement that our own Farmland Market was established 12 years ago, and he has been closely involved with the computerisation of the results ever since.
In one respect, recent years have clearly seen the emergence of a two-tier market, with the residential element in land prices strongly evident in the comparatively affluent South East. Allen has contributed the following statistical note on the trend, and compared it with the interesting similarities evident in the United States:
The fall in farming profitability, together with gloomy expectations for the future, has resulted since 1983 in a decline in the average price of farmland in England and Wales. In an article last July(1), I suggested that both a priori reasoning and detailed examination of the market indicated that in certain areas increasing attention would need to be paid to non-farming factors as determinants of land prices. This suggestion seems to be confirmed by movements in the average price of farmland in the country as a whole compared with those in the South East (Kent, Sussex, Surrey, Isle of Wight, Hampshire, Buckinghamshire, Berkshire, Oxfordshire) where the influence of non-farming factors — in particular the demand for housing — is probably greatest.
The average prices per acre for the past five years are given in Table 1, from which it is clear that while prices in England and Wales as a whole reached a peak in 1983 and have since declined, prices in the South East have shown a consistent increase during the whole period.
An interesting similarity can be detected over the same period in the case of farmland prices in the United States of America. Average prices there reached their peak in 1982, a year earlier than in this country, and have since shown a considerable and well-publicised decline. But the decline in prices is not universal and, as Table 2 indicates, consistent increases in price have in fact been recorded for the New England states and, perhaps surprisingly, for Texas. More detailed studies for Texas(2) report that for the state as a whole only 25% of the market value of farmland can be attributed to its value for agricultural production, while in the scenic hill country this proportion may fall to as low as 10%.
Data from both countries thus confirm the strong influence on farmland prices of a reasonably attractive countryside within easy reach of expanding centres of population and industry. It seems likely that values of agricultural land will need to take this influence increasingly into account.
(1) Maunder, Allen, “Farmland Values: prices, rents and incomes since 1970”, Estates Gazette, Vol 275, July 20 1985.
(2) See Pope, CA and Goodwin, HL, “Impacts of Consumptive Demand on Rural Land Values”, American Journal of Agricultural Economics, Vol 66, No 5, Dec 1984.
