Farmland in England surging ahead as investors at home and abroad compete for short supply

Written by Ray Clancy

Thursday, 01 April 2010 08:30

The value of farmland in England increased by 5.4% in the first quarter of 2010 as investors and overseas buyers returned to the market, according to the latest sector report.

Growth in the last 12 months now stands at 15.5%, the Knight Frank Farmland Index shows and analysts expect values to rise by a further 10% this year.

The average price of farmland is now £5,397 an acre, the highest level recorded by the index with prices are being driven up by a continuing shortage of supply and increased interest from overseas buyers and investors.

The amount of farmland publicly advertised for sale so far this year has fallen by almost 20% while supply has fallen by 13%.

‘The strong performance of the English farmland market that we saw at the end of the last decade has continued this year. A shortage of farmland for sale, combined with demand from investors and overseas buyers, has helped to ensure values continue to rise,’ explained Andrew Shirley, head of rural land research at Knight Frank.

‘Investors, including those from overseas, are becoming more active in the market and, along with lifestyle buyers, accounted for virtually all of Knight Frank’s farmland sales so far this year. Despite its recent price growth, the ongoing weakness of Sterling means property assets in the UK look very good value to those buying in other currencies,’ he added.

Knight Frank has found that there is no pattern in the location of overseas buyers, unlike the last decade when there were large numbers of investors and farmers from Ireland and Scandinavia in the market. Buyers this year have, so far, come from countries covering three different continents.

The forthcoming General Election could add an element of uncertainty to the farmland market as buyers wait to see if there is likely to be any change to the tax reliefs associated with farmland ownership. Alastair Darling, however, left Agricultural Property Relief unchanged in last week’s budget and it would seem unlikely that the Conservative Party would treat APR differently if it was elected, Shirley pointed out.

‘It is generally acknowledged that economic confidence in the UK will take a hit if we end up with a hung parliament. If this, however, leads to a further weakening of Sterling it could make investing in English farmland even more attractive to buyers from overseas,’ he added.