Farmland smashes the £7,000/acre barrier

The average value of English farmland rose almost 6.5% in the first three months of 2014 to £7,324/acre – the first time it has broken the £7,000/acre barrier, writes Andrew Shirley.

Over the past 12 months values have increased on average by 16% and over the past 10 years by 212%. This compares with 133% for prime residential property in central London, 51% for the FTSE 100, and just 27% for average UK house prices.

Although it looked like farmland’s 10-year performance would even overtake gold (+235%) at the beginning of the year following a dramatic slide in the precious metal’s value during 2013, bullion has rallied by 7% this year on the back of the Ukrainian crisis and worries over China’s economy.

Farmers have been particularly active so far this year at all levels of the market. For example, a farming family from Devon just bought the 1,324-acre (536-hectare) Shakenhurst Estate on the Shropshire/Worcestershire border, which was guided at £16m.

A farmer buyer exceeded the guide price when they bid almost £10,500/acre for 96 acres (39ha) of arable land in Herefordshire at an auction held by Knight Frank. A 63-acre (25ha) grass farm in Buckinghamshire has also just made £8,730/acre.

James Prewett, head of Knight Frank’s regional farms team, says the sales show the strength of demand across the country.

“Where there is competition we are seeing very good prices being paid. I am just about to launch a 500-acre [202ha] arable farm near Banbury, Oxfordshire, and we have already had some enquiries from expanding dairy farmers looking for more pasture.

“With some milk processors paying over 35p/litre there is the opportunity to make good money at the moment if you can keep your costs under control.”

It is, however, the sale of large blocks of investment grade land that have really helped to drive up average values over the past 12 months, says Tom Raynham, head of agricultural investments at Knight Frank.

A recent sale in East Anglia on behalf of Black Rock made almost £15,000/acre and Mr Raynham says the newly-launched 39,533-acre (15,998ha) and highly diverse Co-operative Farms Portfolio, of which 17,808 (7206ha) are owned freehold across seven units, will be a good test of the investment market.

“I have a number of private investors and funds actively looking for more land in the UK and this could be an interesting option for them. Despite the size of the sale, I think it’s more of an opportunity for the market than a threat,” he says.

Andrew Shirley is head of rural research at Knight Frank.

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