**Rate of Increase Varies from Region To Region**
Average prime arable farmland values in the UK rose by 1.9 percent on the year in the first quarter, outperforming the 1.3 percent increase in the London prime residential property sector, Property Wire reported on April 16, citing figures from the latest research by property firm Savills.
Average values for prime arable farmland rose to £7,800 per acre in the first three months of the year but the rate of increase varied significantly in different regions. For example, the East Midlands saw an annual increase of 4.9 percent while in the West Midlands and the South West values remained flat in the first quarter. Yet, the average increase in the sector across the country was large enough to beat London’s prime residential property market, which has traditionally been one of the strongest performing sectors in the UK.
**A star performer**
The strong growth in value is to be attributed to the high investment interest in “large blocks of commercial unencumbered farmland” from private investors and corporate buyers, according to Savills’ director of farms and estates, Alex Lawson.
“Farm land is undoubtedly one of the asset classes of the moment and already this year there have been a number of transactions both on and off market at figures well in excess of £10,000 per acre,” Property Wire quoted Lawson as saying.
**Lack of farmland**
Currently the biggest issue in the sector is the lack of farmland available, Savills pointed out. In the first quarter of this year, just 13,100 acres were publicly marketed across the country, a 28 percent decrease over the same period in 2012. The lack of available farmland is most severe in Scotland, where supply volumes fell by 71 percent, followed by the north of England with a drop of 61 percent, while in the east of England volumes were down by 42 percent. The decline was partly offset by a sharp increase in regions such as the East Midlands, where volumes were up by more than 50 percent.
**Different farm types**
In its research, Savills tracked the performance of two very different types of farms between 2005 and 2012 to find out which type offered better property investment opportunities. The comparison “clearly illustrates the increasingly diverse nature of the farmland market”, as Ian Bailey, head of Savills rural research, put it.
The first type is the “commercial arable farm” in the east of England, whose value jumped by 180 percent in the seven-year period started 2005. In contrast, the second type – “livestock farm in the south west” – increased in value by just 60 percent between 2005 and 2012.
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“The changing fortunes of the residential sector since 2008 have hit the livestock farm hard, where the property assets in 2012 account for 44% of the total value (almost two thirds in 2005) whereas for the commercial unit the residential component represented just over 4% in 2012 (11% in 2005),” Property Wire pointed out.
For more information about property investment read Investing In Residential Property – The Whys And Wherefores.