Lack of land and increased demand drives farmland prices up in South West15th February 2013

Farmland prices in the South West reached record levels during the second half of 2012, as demand for commercial farmland continued to grow, according to the latest RICS Rural Land Market Survey, H2 2012.

The average price per acre for farmland in the region increased to £6,875* during the second half of 2012. Surveyors attribute the strength of farmland prices to increased demand and lack of available land.

Across the country, the majority of demand continues to be driven by commercial farmers, keen to expand production to capitalise on high agricultural commodity prices. However, surveyors note that farmers are discriminating in favour of large, top quality neighbouring plots with as small a residential component as possible. As a result, there is considerable price differentiation in farmland, even locally. Plots that are smaller, of lower soil quality or contain a higher residential component are attracting much less interest and achieving lower average per acre prices.

RICS Rural spokesperson for the South West, Alex Rew of Stags in Exeter, said: “The 2012 market was characterised by few farms being offered for sale with commercial farms in particularly short supply, while at the same time being the most sought after. In 2012, bare land sold by Stags saw an 11 per cent increase compared with the previous year, with average land values to £6,780 per acre.

“Particular hotspots included East Devon where 39 acres of arable land sold at auction for £11,297 per acre and Mid Devon where 24 acres of arable ground made £11,695 per acre, also by auction. These figures must be read with some caution, however, as prices were very location specific.”

Looking ahead, given the current strength of farmland prices and the lack of available land in the region, a net balance of 41 per cent of surveyors expect prices to continue to increase over the next twelve months.

Somerset Spokesperson, James Stephen of Carter Jonas LLP said: “Good quality land capable of arable production remains in strong demand and prices are expected hold firm. However, following the very wet period we have experienced since April 2012, livestock farmers in particular have seen their profits fall sharply and this has impacted on the demand for pasture land, the value of which has stabilised here in Somerset. Some land on the Somerset Levels in particular has also been affected by prolonged periods of flooding, which will impose a downward pressure on land values in the worst affected areas.

“Despite this, the overall average price for farm land has risen as demand continues to outstrip supply although as ever, location is vital and the value of similar quality land can vary significantly over relatively short distances due to the presence of otherwise on land hungry neighbours.”