Large jump in farmland prices

Commercial farmland prices reached record levels for the third consecutive period using the second half of last year, according to the latest RICS Rural Land Market Survey.

The average price per acre increased to £6,514 during the second half of the year. Farmland has now almost doubled in value in the last five years.

RICS said this large jump was driven by growing interest from commercial farmers, looking to expand their enterprises in order to capitalise on the strength in commodity prices. A net balance of +53% of chartered surveyors reported an increase in demand for commercial land over the previous twelve months, while demand for residential farmland remained flat (-4%).

A significant imbalance between supply and demand was once again evident, as land availability dropped off in the final six months of 2011. One% more surveyors reported a decrease rather than an increase in (non-residential) supply coming on to the market.

According to chartered surveyors, all areas of Great Britain experienced rising farmland prices during the final six months of 2011, with the exception of the North East and Scotland. Significantly, farmland in the West Midlands saw the strongest increase in price.

RICS said that, given the imbalance between supply to the market and demand from potential buyers, surveyors predict the recent trend in farmland prices to continue over the coming 12 months. Respondents expect the strong growth seen in the commercial farmland market to persist (net balance +36) while expectations are somewhat more cautious for the residential land sector (net balance -9).

Sue Steer, RICS spokesperson, said: “Land prices reached record levels once again towards the end of 2011