Savills forecasts that average farmland values will continue to rise in the short and medium term by about 6% per annum. This forecast for annual growth is based upon Savills’s newly-launched farmland model for Great Britain. The weighted model, which takes into account the key variables that affect price such as farm incomes, wheat price and yield, subsidies, prime country house values, is adjusted for any "lag" effect.
Ian Bailey head of rural research said: "Our model predicts that average grade 3 arable land values in England could reach £7000 per acre and more than £5000 per acre in Scotland. However, the current ranges in values achieved are wide and applying our forecasts to the higher figures achieved could see the best land reaching £10,000 per acre well before 2015."
Savills suggests that the supply of farmland at a national level is unlikely to increase to the point of saturation, which would have the potential to have an adverse effect on values. In England for example the average annual supply of farmland between 2000 and 2009 was 123,000 acres per annum and just 105,000 acres during 2009. The volume of supply would need to reach at least 130,000 acres for there to be any risk of saturation.
Ian Bailey head of Savills rural research said: "We see little reason for the annual supply to increase dramatically save for unforeseen shocks; debt levels, which are the biggest driver of supply are not expected to change significantly on a national basis.
"There might however be regional variations, including as small livestock producers in the South West and off-farm businesses in the South East, which have succumbed to recessionary pressures."
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