Boom In Farm Land

According to the Independent, the price of farmland is rising at its fastest rate for more than 30 years as wealthy city dwellers and overseas buyers seek a slice of idyllic rural England and jittery investors rush to move their money out of stocks and shares because of the global credit crunch.

In contrast to falling residential and commercial property values, the average price of farmland rose by more than 10 per cent in the first quarter of 2008, according to a study of agricultural property sales which will be published this month. Arable land, in particular, has become so profitable that its average price has soared from £4,000 an acre in January last year to £5,500 an acre today.

According to the Royal Institution of Chartered Surveyors, the value of farmland rose by 28 per cent during the second half of 2007. The last time agricultural property prices increased at such a rate was during the late 1970s, when annual increases of 40 per cent were common. Knight Frank believes prices will continue to rise by between 10 and 20 per cent this year.

The increases are being fuelled by the astonishing demand for agricultural holdings at a time when food prices are at an all-time high and when very little farmland is coming up for sale. Savills Private Finance, an independent mortgage broker, said the amount of land coming on to the public market each year was down from about 600,000 acres per year in the 1960s to 125,000 acres a year today.

The price of wheat and other cereals has more than doubled in 12 months. While that means the cost of food is going up, it has also improved the profitability of arable farming and made it an attractive investment. At the same time, Britain’s agricultural land is attracting interest from abroad.

While more and more British farmers are buying up farms in Russia and the former Soviet states, our farmland is relatively cheap by western European standards. Fifteen per cent of British farms are now sold to overseas buyers. Last year, the Dutch overtook the Irish as the chief foreign purchasers, snapping up 6 per cent of the available property, compared to Ireland’s 5.5 per cent. Investors from Denmark bought 3 per cent, as did others from Sweden, Norway and Finland. While studies show that the Irish tend to favour farmland in the west of England, northern European buyers are looking increasingly to East Anglia.

The boom in agricultural property is mirrored across the Atlantic. The most recent figures from the US Department of Agriculture show that the price of an average acre of arable land rose by 13 per cent in 2007 and is likely to go up by a further 15 per cent this year.