Farmland demand continued to outpace supply in the final six months of 2014, with land prices rising by 8.3% over the year to reach over £10,067 per acre, according to the latest RICS/RAU Rural Land Market Survey H2 2014.
During H2 2014, the average cost of farmland rose to £10,067 per acre across England and Wales, hitting a record high for the eleventh consecutive period. During the same period in 2013 an acre cost, on average, £9,294. Despite anecdotal evidence that the recent fall in commodity prices is starting to temper the pace of demand – particularly for smaller areas of land in all parts of the country – prices are expected to continue to rise over the next 12 months.
The increase in demand from ‘lifestyle’ buyers that began in H2 2013 continued throughout the whole of 2014 with this trend being noticed across most parts of the UK. This is adding to price pressures and is supporting expectations for further increases. Anecdotal evidence also indicates continued strong demand from investor purchasers in pursuit of larger parcels of prime land. Across the UK the supply of commercial farmland at best remained flat or decreased in nine of the ten areas, while demand has continued to grow in all but one part of the UK.
According to surveyors, average arable land rents remained relatively flat during 2014 at £158 per acre, while average pasture rents rose by 7.8% over the year to reach £107 per acre.
The highest annual price growth in the UK was seen in Scotland, despite uncertainty driven by the referendum and CAP review. Prices in Scotland rose almost 17% over the year, although at just £4,375 per acre, prices in Scotland are still 47% below the national average with the price of pasture land at least 40% cheaper than any other part of the UK. It remains to be seen whether the recent announcement on plans to overhaul tenant farming will have any effect on land prices.
Yorkshire and Humber and Wales also witnessed particularly strong price growth during 2014 with arable land in both areas driving the rises.
Josh Miller, RICS Senior Economist, commented:
“Farmland prices continue. Competition for the right plots remains fierce, especially amongst farmers, while demand from lifestyle farmers is showing signs of life”.
“Although there remain a number of risks on the horizon, including commodity price volatility, the forthcoming general election and a possible exit from the EU, surveyors remain confident on the whole that prices will continue to rise over the next 12 months”