Supply of farmland rises, but prices in east ‘holding up’

Ploughed fields near Witnesham in Suffolk.

Ploughed fields near Witnesham in Suffolk. - Credit: Sarah Lucy brown

The UK-wide supply of farmland increased sharply in the first half of 2015, a survey has revealed.

But the Royal Institution of Chartered Surveyors (RICS)/Royal Agricultural University (RAU) Rural Land Market Survey found the average cost of farmland in East of England rose to £8,375 an acre as demand for ‘lifestyle’ farmland grows.

Demand for residential farmland in East England grew in the first six months of the year and 9% of respondents expect the price to increase over the next 12 months, it found.

The study revealed that 45% more rural surveyors were reporting higher prices in commercial and residential farmland in the region.

During the first half of 2015, a net balance of 45% of respondents reported an increase in the supply of commercial and residential – with the supply of residential farmland increasing at its fastest rate since the data series began in 1999.

Elsewhere, Scotland and the North East of England saw a fall in demand not just for commercial but also residential farmland, but the results for South West and the East Midlands suggests demand is still edging upwards in these areas.

At a national level, the South East saw the largest price increase over the year, with both arable and pasture land seeing sharp rises.

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Ben Taylor MRICS, Partner at Bidwells Rural Agency in Cambridge, said: “There has been a notable increase in the supply of arable land on the market, and prices at present appear to be sustaining and in notable areas, showing continued growth.”

Mark Russell, a Cambridge-based partner with Carter Jonas, said the survey reveals a change in market position but this does not mean prices will drop, merely that they will not continue their previous rate of growth as some of the “fizz” seen in 2013 and 2014 has evaporated.

“The survey’s transaction-based measure of farmland prices fell by 2.5% during the first half of the year to £9,692 per acre but here in the east the land coming to market is frequently of the type that commands the best prices so we see beyond £10,000 regularly, especially where the property concerned has an appealing additional element to it,” he said.

“Investors seek quality land in large blocks of more than 1,000 acres, exactly what the east is able to offer. At the other end of the spectrum, small parcels of pasture that can be divided into horse paddocks see prices per acre that most landowners can only dream of. To get £20,000 or £25,000 per acre, especially close to villages where horse ownership is popular, is not out of the ordinary.

“Developers, too, are now looking for land close to boundaries of residential areas that has potential resulting from the Government’s drive towards increased housebuilding and accompanying relaxation of planning rules in villages. The result is that significant premiums are being paid and there’s likely to be strong competition for what would previously have been pony paddock or amenity land.

RICS chief economist Simon Rubinsohn said they seeing a “considerable divergence” in the outlook for commercial farmland compared to land with a significant residential component.

“Annual average arable land rents fell by 7% during H1 and by 9.7% over the year, with anecdotal evidence suggesting the recent falls in commodity prices are the primary cause of this decline,” he said.

“Despite this, the lifestyle market remains relatively strong across much of the country with prices of land with a large residential component generally expected to continue moving higher.

“Political uncertainly leading up to the general election is likely to have had some further impact on the results in the survey. However, market conditions look set to remain challenging notwithstanding the outcome with the global economic environment set to remain a drag on commodity prices.”

The twice-yearly RICS rural market survey looks at farmland data across England, Wales and Scotland. The survey tracks national farmland market prices, demand, availability, yields and expectations broken down to a regional level.

The statistics are provided by RICS members in England, Wales and Scotland, and are collated by the Royal Agricultural University at Cirencester.