East Anglian farmland prices rise ‘at fastest pace since peak in 2015’
- Credit: Chris Rawlings
East Anglian farmland prices are on the rise – and soaring inflation may stoke demand, experts believe.
Supply of farmland over the last few years has been limited – leading to higher prices in demand hotspots with a wide range of potential buyers including “lifestyle” purchasers.
Research by land agents Savills suggests small farms are making up an even larger proportion of properties on offer in the region than previously.
Oliver Holloway, partner at Framlingham-based land agents Clarke and Simpson, said his firm had been involved in the purchase and sale of over 2,500 acres across East Anglia in 2021. Typically, the value of bare land achieved was in the region of £9,000 to £10,000 per acre – approaching the price highs of the mid-2010s.
Farmland values were rising at their fastest pace since the peak in 2015, he added, comparing favourably to many other investment classes over the past 12 months.
“With the UK’s inflation now sitting at 7%, it is highly likely that land prices will remain firm through 2022. During periods of high inflation, investors often seek out less risky asset classes such as farmland and which produce a steady income stream,” he said. Farms have been faced with “huge” variations in commodity and input prices during this period – and especially over the past six months, he added.
“But strong demand from a variety of buyers combined with a shortage of supply has underpinned the land market in East-Anglia.
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“A prudent buyer will generally take a longer term view and objective on land purchases, being resilient to short-term fluctuations and instead look to longer-term opportunities and potential diversification that the land may create. There are also still a number of factors generating demand for farmland and bringing in investment from those outside agriculture.”
Most of the land and farms marketed publicly last year were under 250/300 acres – but a few larger concerns were sold publicly, he said, including Ashfield Place Farm, near Debenham, a 900-acre commercial operation which Clarke & Simpson marketed as a whole or in up to eight lots.
“We received extensive interest for the farm and a number of offers from such buyers, which resulted in the guide price of £9.675m being exceeded by some margin,” he said.
But research by Savills showed sales of small farms dominating – reflecting a “race for space” sparking by the pandemic.
It showed 75% of farms publicly marketed last year in the East of England were between 50 and 250 acres. Of the others, 14% were 250-499 acres, 7% were 500 to 999 acres and 4% more than 1,000 acres.
In 2018, 65% of farms marketed were in the 50 to 250 acre bracket, it said.
William Hargreaves, who leads the rural agency team for Savills in Suffolk and Cambridgeshire, said demand for smaller farms and landholdings had grown as a result of lockdowns which led to urban buyers seeking rural living or lifestyle changes.
“Over the past couple of years we’ve sold a number of these for this purpose, as well as blocks of unequipped bare land. Through our network of offices, we regularly come across purchasers looking to relocate to East Anglia, with buyers coming from all over the country and abroad,” he said.
“Some of this demand has come from those looking for property to accommodate tourism and leisure businesses – such as wedding venues and glamping pods – or rural enterprises where value can be added, for example ice cream production, cider making or online flower delivery.
“There are also farmers in the market for small units where they can diversify, as well as new urban buyers keen to re-employ their business and marketing skills within a rural setting.”
Analysis by Strutt & Parker through its Farmland Database shows the average price of farmland reaching its highest level since 2016, with most farms and estates now selling for at or above their guide price. The database shows the average value of arable land reaching £9,500/acre – a rise of £100/acre since the end of 2021.
In recent years, around a fifth to a quarter of arable land has been selling for around £8k or less but, in 2021, just 11% of land sold at that price with most achieving higher prices, it found.
Strutt & Parker’s Tim Fagan, who operates in Suffolk and Essex, said all farm types were selling in the East of England, but commercial farms were proving most popular.
“There has been a distinct shortage of fully serviced farms for some time, with the market being dominated by blocks of bare land,” he said.
“However, we do expect to see more land coming to the market this year compared to 2021, with the ending of the Basic Payment Scheme (BPS) acting as a catalyst for some people to take retirement.
“Demand is likely to remain strong, with those already looking for farms being joined by new buyer types who are keen on land ownership for reasons such as diversification and lifestyle. Prices are currently ranging from £7,750/acre to £11,000/acre, dependent entirely on location, land quality and strength of local buyers.”