Big rise in farmland on market – but average prices remain strong

The amount of farmland on the market has shot up, after a spell of being in historically short supply.

An increase in the area coming to the market has been sustained over the second quarter of 2015, according to Strutt & Parker’s Farmland Database.

Despite the increased supply and challenging times for the farming industry, average land prices remain at record levels.

The database, which tracks farms and estates over 100 acres in the market, shows that 41,550 acres came on to the English land market between April and June 2015, compared with just 18,625 acres in the comparable period last year.

Mark McAndrew, partner in Strutt & Parker’s Estate and Farm Agency department, says: “This is partly down to a small number of investors who have decided the time is right for them to take their profit.

“There has also been an increase in the number of 100-400 acre blocks or small farms coming to the market across the country. After a couple of years of poor commodity prices some people are deciding to retire or others may be looking to raise some cash and take advantage of the continuing high prices.

“It means buyers in today’s market have a much wider choice of opportunities available to them than they did in 2014 – from bare blocks of land through to country estates.

“But while there has been an increase in the amount of land coming on to the market compared to this time last year, if you look back, you see that last year was an anomaly and we are back to more ‘normal’ levels.”

Average arable land prices in England rose to £10,463/acre in the second quarter of 2015, compared with a three year rolling average of £9,025/acre.

The biggest rise was seen in the south east of England where prices are now closely matching those seen in the east of England. Hampshire in particular has seen some high premiums paid for land.

Prices paid for pasture land also increased with the average price paid rising from £6,763/acre in the first quarter of the year to £6,851 in the second quarter of the year.

Mr McAndrew says while the averages have held up, some of the high premiums paid for land in 2014, due to the lack of supply, have eased back.

“The premiums which saw people paying up to £15,000/acre are scarcer, but because there are now greater volumes being sold in the £9-11,000/acre range the averages have held up.

“Investors are being more cautious, but they are still in the market along with forward-thinking farmers looking to grow their businesses. Land is perhaps not selling quite as quickly as it was, because there is not quite the level of competition as last year, but there is still the demand out there for the right thing.”

While he expects prices to flatten off over the next 12-18 months, he believes there could be a steady increase after that.

“We are hearing of many landowners with development money in the pipeline and they could be a major driver of the market over the next couple of years. We suspect development decisions were put on hold around the time of the election and we now have many people coming to us to register as they are due to come into funds within the next 12 to 24 months.”

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