The rate of growth of farmland prices has trebled, reaching the highest levels in the survey's history, reports the Royal Institution of Chartered Surveyors (RICS) rural land market survey. The farmland market strengthened rapidly in the second half of the year, with prices rising by 18% compared to 6% in the first half of the year.
Competition between City fuelled 'lifestyle' buyers and farmers, keen to expand production and exploit higher commodity prices, has resulted in demand rising at the fastest pace in the survey's history. Demand is far exceeding supply of available land. However, rising demand is not only being fuelled by domestic farmers. Chartered Surveyors report that foreign farmers - particularly those from Denmark and Ireland - are seeking to purchase land due to the high price levels in their homeland markets.
The weighted average price of farm land rose to £8,164 per hectare, up from £7,219 in the first half of 2006. The level of sales in 2006 finished at the highest level recorded in four years, with activity 50% higher than in 2004, and surveyor's confidence, for both commercial and residential farmland prices rose to the record levels.
RICS spokesperson Sue Steer commented: "High commodity prices have resulted in a huge increase in demand as farmers compete with non-farming money for land. However, availability of land has slipped back as strong commodity prices has led to a sense of renewed optimism in agriculture and reduced the financial pressure on farmers to sell, despite rising interest rates. City slickers are still attempting to take advantage of low farmland prices with large bonuses encouraging ever-popular City lifestyle trends. The UK continues to attract investment from Denmark and Ireland as foreign buyers enjoy the luxury of low prices compared to home markets."
