With many UK growth markets - including central London - experiencing a slowdown this year, it seems farmland is the safe bet for property investment in 2013. According to research from Savills, the upward trend for annual growth will continue this year, with farmland values predicted to rise by 40 per cent over the next five years. This is in contrast to prime central London property, which will only witness an average of 26 per cent growth over the same period.
Nevertheless, not all farmland will enjoy the same level of performance, and the gap between prime units and other classes is increasing. Alex Lawson, director of farms and estates, explained: "It is no longer a case of one size fits all and there are now clear divergences in value between the prime quality, well located blocks of arable land and the rest, which are likely to widen further. Across all property asset classes the economic uncertainty has pushed investors towards quality and farmland is no exception."
The sale of secondary and tertiary land will depend on reasonable pricing, despite the limited supply of prime farmland and high demand. The difficult agricultural environment will also put pressure on the sector, with the industry experiencing dramatically lower yield and the livestock sector incurring higher costs for housing animals. Consequently, average farming incomes are expected to decline in 2013, albeit marginally.
Nonetheless, farmland values are still increasing, with the Knight Frank Farmland Index Q4 2012 report showing that average values in England rose by almost three per cent in the final quarter of the year. This means that farmland can be expected to fetch an average of GBP 6,214 per acre. 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."
- Tuesday 22 January 2013