Farmland is ‘becoming a safe refuge’

London and country agents Savills says the value of grade three arable land rose 3.3 per cent during the second quarter, following a 2.7 per cent rise in the first three months of this year.

The average value is now £5,900 an acre, up by almost 200 per cent on a decade ago.

Ian Bailey, head of Savills rural research, says: “This average half year growth of six per cent accounts for nearly two-thirds of the growth forecast for this year.

“We expect growth rates to slow during the second half of this year as the market become increasingly polarised, with a strengthening correlation between values and land type, quality and location.”

In eastern England, arable land continues attracting significant interest, which is reflected in the region achieving the strongest quarterly growth, whereas in the South West, grassland values increased the most.

Savills director Alex Lawson said: “There are some good sales taking place but the market is showing signs of becoming two-tiered.

“Where land is not of the best quality, where there are no interested neighbours or there are significant blights, farms can take longer to sell.

“In addition to farmers, investment buyers are around for the right proposition and amenity estate buyers are returning. We have seen more open market sales than private deals so far this year.”

In Scotland, average values have remained unchanged since September 2010, at just more than £4,000 per acre, largely due to the lack of land marketed in the first five months of this year. With an increase in buyers reported since May, values could change later in the year.

The agents say many land deals are clinched by buyers without any farming background. Some of them represent ‘new’ money from the City.

The report says: “An analysis of farm transactions in the first half of the year, where Savills acted for the seller or buyer, suggests renewed interest from new non-farming lifestyle buyers. They represented about one-third of all buyers, against less than a quarter in 2010.”

Farmers remain the dominant buyers with farm expansion the principal reason for purchases. There is currently little interest in UK farmland from overseas buyers, who have turned net sellers.