Farmland values reached new record levels ending the year at an average of £21,053 per hectare and £8,520 per acre.
Agricultural land value growth over the long term exceeded residential house prices, FTSE 100 and 10 year gilt yield.
Sustained buyer demand and limited availability is driving price growth.
Farmland values set to rise by 6% p.a. over the next 5 years.
Southern and Eastern regions saw strong growth in arable land values – notably Eastern (+16.2%), South East (+15.4%) and East Midlands (+14.8%). FBT arable rents rose by 16.2%.
A number of encouraging positive indicators have driven land values to reach new record levels, exceeding equities and national house prices in the long term, according to Chesterton Humberts latest farmland market snapshot. The company forecasts that farmland values will increase by 30% over the next five years as the fundamentals driving growth become stronger.
Despite extreme weather conditions and a stagnating economy, farmland values in Southern and Eastern regions saw strong growth during 2012, with national figures ending the year at an average of £21,053 per hectare and £8,520 per acre. Meanwhile long term growth shows figures have quadrupled since 1995, outpacing national house prices (160.2%) and FTSE 100 (92.4%). Agricultural rents also exhibited healthy growth reflecting the uplift in land and commodity prices.
Andrew Pearce, head of Rural Agency puts this increase down to a shortage of available land and strong buyer demand; “Commercial farmers are taking advantage of rising food commodity prices whilst investors view the growing population, rising food demand and limited supply of land as a solid long term investment opportunity.”
David Hebditch, head of Chesterton Humberts’ Rural Division, explains: “Investors are increasingly showing a greater appetite for assets which exhibit good growth potential and are tax efficient.
Despite the recent adverse weather conditions, there is a compelling long term case for investing in farmland as the attractions of the sector with regard to scarcity value, rising food demand and tax advantages are set to continue for the foreseeable future. The increasingly unpredictable global weather conditions will likely exert upwards pressure on food commodity prices as well whilst new technology will create longer term greater efficiency and cost savings.”
“We are quite bullish about medium term growth in farmland values given the likely supply/demand imbalance and have predicted that farmland values will rise by 6% per annum over the next five years, with larger good quality parcels capable of comfortably exceeding this.”
Regional variations are apparent. The Eastern region recorded the highest growth in arable land values (+16.2%) and for pasture land (+13.6%) in 2012 whilst Wales posted the biggest decline for both.
With a network of 55 offices across the UK, including 28 in London, Chesterton Humberts www.chestertonhumberts.com is one of the UK’s leading property consultancies with a full range of property services including residential sales and lettings, commercial agency and management, rural land management, professional advisory services, professional valuation and other surveying services.
The company also has a significant international presence with 21 offices around the world, including St Tropez, Gibraltar, Mallorca, Umbria, Tuscany, Singapore, Moscow, South Africa, Abu Dhabi, Sydney and Brisbane.