The average value of farmland in England has gone up by 12% so far in 2014, according to the latest Knight Frank Farmland Index.
Agricultural land prices rose by a further 2% in the third quarter of the year, adding to the 9% growth witnessed during the first six months of 2014. The average value of commercial farmland without any land or buildings now stands at an average of £7,689/acre, or exactly £19,000/hectare.
Year on year, prices are up by 15%, meaning farmland has outperformed most other major asset classes, including the UK housing market (+10%), the FTSE 100 (+5%) and gold (-9%). Over the last decade, farmland has gone up in value by 187%, which is second only to gold (+224%).
Prices continue to be pushed up by limited supply - the amount of publicly advertised land is down 15% when compared with 2013, according to the Farmers Weekly Land Tracker – as well as the ongoing demand from both farmers and investors.
Farmers remain focused on the long-term and, despite recent price falls in agricultural commodities such as wheat and milk, they are still keen to secure neighbouring or nearby land when it becomes available.
The number of farmers with roll-over funds to spend on land is rising as a result of house builders upping their output and obtaining more development sites. New buyers could also be brought into the market as farmland is acquired for the contentious HS2 scheme.
Additionally, the Wellcome Trust’s recent purchase of the Co-op farms portfolio for nearly £250m proves that investors’ hunger for land remains undimmed. Part of the problem for investors, though, is the dearth of appropriate investment-grade land available, combined with strong competition from neighbouring landowners willing to pay a “legacy” premium for land that they may only have one chance to buy and, once purchased, could stay in their families for generations to come.
Consequently, plenty of investment-led deals are now happening off market. Knight Frank predicts private deals are currently outstripping public ones by as much as two to one.
Large swathes of arable land tied up in high-value period farmhouses are selling fast. However, the market for estates with large residential properties is doing less well, according to Clive Hopkins, Head of Knight Frank’s Farms & Estates team. As a result, large chunks of an estate’s farmland are being sold off separately for a premium price in certain cases.
“I think this trend really highlights the strength of the farmland market,” Clive said. “Traditionally it has been the house leading the sale, now often it is the land.”
Comments