Farmland prices rose in the second half of 2009 as landowners’ reluctance to sell pushed supply to “exceptionally low levels”, according to the latest RICS rural market survey published today.
The survey found 31% more chartered surveyors saw demand for commercial farmland rise rather than fall in the six months to December last year.
This was up from 22% in the previous half-year and demonstrates the growing appeal of land as an asset class, RICS said.
Demand for residential farmland also rose slightly, with 1% more surveyors reporting it rising rather than falling, in contrast to the first half of the year when 30% more reported it to be falling.
The RICS said demand was coming from investors rather than “hobby farmers, buying up rural retreats with city bonus money”.
Established farmers were also looking to capitalise on rising livestock prices by acquiring land to expand their existing operations.
Meanwhile, the survey found that those with land were keen to hold on to it. The net balance of surveyors reporting falling rather than rising availability was 40% for commercial land and 43% for residential farmland.
According to the survey, land prices rose by 4% to £12,715 per hectare, while land that includes a residential component rose by 7.8% to £16,381 per hectare.
RICS spokesperson, Sue Steer said: “When prices were rising two years ago it was mainly being fuelled by hobby farmers, buying up rural retreats with city bonus money and inflating the market.
“However these latest results indicate that it is now farmers looking to expand and investors who see it as a viable business or investment class that are fuelling the rise in demand.
“Those with land are loath to dispose of it, and those without, or with a limited supply, are keen to get into the market and capitalise on its rising value.
“Couple this with the fact that farmers are increasingly optimistic about the outlook for agriculture and suddenly an investment in either pasture or arable land is a very attractive prospect.”
patrick.clift@estatesgazette.com
