Farmland prices reach all time high

Farmland prices reached an all time high during the first half of 2011, as land availability failed to match growing demand, says the latest RICS Rural Land Market Survey, H1 2011.

Chartered surveyors estimate that the average price per acre increased to £6,115 during the first half of the year, reaching all time record levels for the second consecutive period.

Interest from potential buyers of commercial farmland continued to surge ahead, with 50 per cent more respondents reporting increases rather than decreases in demand. Surveyors report this is driven largely by increasing demand from commercial farmers who are looking to expand production on the back of elevated commodity prices.

Alongside rising demand, land availability increased for the first time in three years. 27 per cent more respondents reported rises rather than falls in commercial farmland coming onto the market, while a net balance of seven noted an increase in residential farmland availability. Although positive, these increases were not enough to keep pace with the growing level of demand.

During the first six months of 2011, all areas of Great Britain experienced rising farmland prices, with the exception of the North West and Wales, where prices dipped. However, farmland in theses areas was also the most expensive, with surveyors reporting prices of £6,938 and £6,500 per acre respectively.

Given the imbalance between supply to the market and demand, surveyors predict the recent trend in farmland prices to continue over the next twelve months, with strong growth expected in the commercial farmland market (net balance +42) but a flatter trend in the residential sector (net balance 0).

Commenting, RICS spokesperson, Sue Steer said: "The first six months of 2011 saw farmland prices increase to record levels once again. While supply to the market increased for the first time in three years, it wasn't enough to meet demand from potential buyers of commercial land which, once again, kept prices high across Great Britain. With commodity prices still very high, many commercial farmers appear more keen to expand their businesses rather than sell their land. This can only lead to even higher prices over the next 12 months. In contrast, the residential farmland market remains relatively subdued, reflecting the broader national housing picture."