UK farmland prices reached a record high, and are set to accelerate gains despite a potential rise in the supply of land on the market, as a succession of poor harvests prompts farmers to sell up, Knight Frank said.
The consultancy said that UK land prices rose by 1.8% in the April-to-June quarter to £6,421 an acre, representing a further recovery from a late 2012 pullback blamed on last year’s dismally wet farming conditions.
“We recently had offers of over £10,000 an acre for the farmland on an estate in the west of the country,” Knight Frank said.
The poor agricultural conditions – which are expected to mean a well-below-average UK wheat crop this year after extreme wetness badly hampered autumn sowings – look set to continue to bring an influence on the market.
“More land could come to the market over the next few years,” Knight Frank said.
“Wheat prices have weakened and poor autumn planting conditions in 2012 mean this year’s harvest may be the second or even third poor one in succession for some farmers.
“This may encourage a number to sell.”
‘Can still be very patchy’
Nonetheless, prices will rise by 5% over the next 12 months, well above the rate of 2.0% over the past year, thanks to the extent of demand.
“Demand is such that the market will cope with the extra supply,” Knight Frank said.
“We have a number of clients who have committed a serious amount of money to invest in farmland,” Clive Hopkins, head of Knight Frank’s farms and estates team, said.
Sites in best demand are “good-quality arable land unencumbered with high-value residential property”, with Knight Frank also flagging the appeal of efficient poultry operations and renewable energy income.
However, he cautioned against overexuberance, saying that “the market can still be very patchy depending on location, land quality and type”.
Land vs gold
Knight Frank also highlighted the differing fortunes of farmland and gold, which are often classed together as “safe haven assets”, and which some commentators see as showing price correlations.
However, gold prices tumbled by some 20% during the April-to-June quarter.
“For a number of years gold has been the only mainstream asset to outperform farmland, but over the short-term this situation has been reversed,” the consultancy said.
(Source – http://www.agrimoney.com/news/uk-land-prices-hit-record-and-set-to-gain-further–6023.html)