Farmland forecast

    GB farmland values are set to rise by an average of 40% over the next five years, although the gap between the best and the rest is likely to widen further.

    Despite nine years of sustained price rises, all types of farmland are likely to continue to appreciate in value, with prime arable land forecast to reach £12,000 an acre by the end of 2017, according to Savills research.

    “Across all property asset classes the economic uncertainty has pushed investors towards quality, and farmland is no exception,” says director of farms and estates Alex Lawson. “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 even more.”

    The Savills forecast considers agricultural profits, residential market growth, interest rates and exchange rates, and their relative impact on supply and demand for land.
    “Since 1998 the overall trend of land supply is down, although during the past decade the average annual acreage publicly marketed has been fairly static,” says Alex.

    “We don’t expect this scenario to change significantly but there may be some debt pressures following the extreme weather of this year and the knock-on effect in the livestock sector. In contrast we expect continued healthy commodity prices to limit the number of good quality commercial farms that are marketed.” 

    Buyers remain extremely interested in commercial arable farms, with investment returns and tax benefits being the key drivers, he adds. “Cash remains the predominant means of purchase, providing the principle funds in three-quarters of all transactions, while the debt-funded purchase has been steady since 2006, which is perhaps surprising given the availability of cheap money.”

     
     

    Key contacts

    Ian Bailey

    Ian Bailey

    Director
    Rural Research

    Savills Margaret Street

    +44 (0) 207 299 3099

    +44 (0) 207 299 3099

     

    Alex Lawson

    Alex Lawson

    Director
    National Farms and Estates

    Savills Margaret Street

    +44 (0) 20 7409 8882

    +44 (0) 20 7409 8882