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Booming demand pushes farmland prices to record levels

This dramatic jump was driven by growing interest from commercial farmers, looking to expand their enterprises to capitalise on the strength in commodity prices. A net balance of +53% of chartered surveyors reported an increase in demand for commercial land over the previous 12 months, while demand for residential farmland remained flat (-4%).

A significant imbalance between supply and demand was once again evident, as land availability dropped off in the final six months of 2011. Some 1% more surveyors reported a decrease rather than an increase in (non-residential) supply coming on to the market.

According to chartered surveyors, all areas of Great Britain experienced rising farmland prices during the final six months of 2011, with the exception of the North East and Scotland. Significantly, farmland in the West Midlands saw the strongest increase in price.

Given the imbalance between supply to the market and demand from potential buyers, surveyors predict the recent trend in farmland prices to continue over the coming 12 months. Respondents expect the strong growth seen in the commercial farmland market to persist (net balance +36) while expectations are somewhat more cautious for the residential land sector (net balance -9).

Sue Steer, RICS spokesperson, said: "Land prices reached record levels once again towards the end of 2011, as commercial farmers looked to capitalise on increasing commodity prices by expanding their businesses. With demand continuing to surge ahead and a seemingly low level of land coming onto the market, it is easy to see why prices continued to rise so sharply across most of the country.

"Furthermore, it would seem that this trend is set to continue over the next 12 months. However, the outlook is slightly more mixed for farmland which is more geared towards the residential sector, reflecting the broader national housing picture."

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