Farmland continued to be an attractive real estate investment opportunity in the final quarter of last year, according to the Knight Frank Farmland Index Q4 2012 report. Average values in England rose by almost three per cent, fetching GBP 6,214 per acre. At a time when other assets are struggling to retain their values, it is little wonder that investors are turning their attentions to the rural market.
Over the last 60 years, farmland prices have risen by almost 11,500 per cent from just GBP 54 per acre and this momentous ascent doesn't look set to slow any time soon. Knight Frank predicts that land prices will increase by approximately five per cent this year. Andrew Shirley, head of Rural Property Research, stated: "English farmland’s bull-run is not yet over, despite the impact of the horrific weather on farming profitability this year. The market proved resilient in 2012 and is predicted to gain further ground next year."
Growth in the farmland market over the last five years now stands at over 50 per cent, while over the decade values have increased by 200 per cent. However, this performance was the result of a favourable first half of the year, with the weather affecting the harvest in Q3 and Q4. "A fall in the supply of good farms for sale, coupled with an increase in demand from private investors, helped to keep prices stable," Mr Shirley justified.
Despite a bad harvest, Knight Frank doesn't expect any negative impact on prices this year. "More land may come to the market as some more highly-geared producers with one bad harvest in the barn and another in the ground decide to call it a day. However, there is unlikely to be the kind of glut that could pull back prices," Mr Shirley said. Instead, it is likely that an increase in availability will benefit the market, as investors compete for prime spots of land. Nevertheless, increases won't occur at the same rate across the country, with certain areas enjoying greater demand, such as the Cotswolds.
- Tuesday 08 January 2013