iNVEZZ.com Friday, August 23rd: Farmland prices across the UK have more than trebled in less than a decade, driven primarily by investor demand, according to a new survey released today.
The Rural Land Market Survey by the Royal Institution of Chartered Surveyors (RICS) is indicating that during the first six months of the year the average price of farmland in the country has jumped to £7,440 an acre, more than three times the price in 2004, when an acre cost just over £2,400.
At regional level, the price of an acre of land in North West England has recorded the biggest rise, increasing by 35 percent over the first half to reach £8,813, while Scotland remained the cheapest region with a value of £4,438 an acre. Yet, even the Scottish figure is a new record, the authors of the survey noted.
The record rise in farmland prices, described by RICS as “nothing short of staggering”, had been driven by growing demand from investors, as well as farmers wanting to expand, the surveyors said.
Even though wheat prices have fallen substantially this year, the survey suggests that many farmers are keen to capitalise on the general trend of rising prices of soft commodities. Investors, in the form of sovereign wealth funds, pension funds and wealthy individuals, have also been buying farmland.
BBC News quoted RICS spokesperson Sue Steer as saying: “In less than ten years we’ve seen the cost of an acre of farmland grow to such an extent that investors — not just farmers — are entering the market.”
The strength of demand for commercial farmland, however, is not broad-based. Surveyors noted that most farmers want to buy large, top quality, neighbouring plots with as small a residential component as possible. Prices vary widely, even in the same areas where plots that are smaller and of lower soil quality are attracting much less interest and achieving lower average prices.
**Further Rise in Farmland Prices Expected**
With farmland in high demand, the six months to June saw a slight increase in supply. Fourteen percent more chartered surveyors reported a rise rather than a fall in supply. Yet, demand rose faster, exceeding the acreage put up for sale during the period.
!m[Increasing Investor Demand Spurs Record Rise as Supply Fails to Keep Up Pace ](/uploads/story/5047/thumbs/pic1_inline.jpg)
RICS’s report predicted further farmland price increases over the coming year, with the market “far from finding its level”. Respondents to the survey expect the trend of rapidly growing prices to continue over the coming year with a net balance of 46 percent more surveyors predicting further growth.
“If the relatively tight supply and high demand continues, we could experience the cost per acre going through the £10,000 barrier in the next two to three years,” Steer stated.