According to our Farmland Value Survey, the value of land continued to strengthen in the second quarter of 2012. Across Great Britain the average value of prime arable land rose 2.1% to just under £7,000 per acre following a 1.8% increase in the first quarter of 2012.
In England, the average value of prime arable farmland rose by 2.1% to just over £7,000 per acre, recording total growth for the first half of this year of 4%. This compares with a 6.4% rise in the first half of 2011.
Closer analysis shows the highest rates of growth during the first half of 2012 were recorded across the arable areas of the eastern counties of England. Here, demand for productive commercial land remains strong. Prime arable land values increased by 4.6% in the East Midlands and 2.9% in the East to average £7,500 per acre and £7,650 per acre respectively (see Graph 2).
In contrast, 2012 first half growth was more muted across the West Midlands (1.5%), the South West (0.6%) and the South East of England (2.8%). This is likely to be due to the prominence of smaller livestock farms in these regions, where the residential element of the whole farm value is relatively high.
In Scotland, the average value of prime arable land increased by 2.2% during the first half of 2012. This growth was recorded entirely in the second quarter with the best arable land in Scotland now averaging £6,000 per acre. Our Farmland Value Survey shows that grassland values have remained unchanged.
In some cases prices achieved have been well in excess of average values recorded with around £10,000 per acre being reached in some isolated cases for good commercial arable farms.
Graph 3 illustrates the significant increases recorded in famland values since 2003 in current (200%) and real (165%) terms. Although higher inflation rates in 2010 and 2011 dampened real growth relative to current growth rates, there is no sign of a correction in values.
Buyers and Sellers
The demand for UK farmland has not faltered. According to our analysis of farm transactions, where Savills acted for the buyer or seller, farmers continue to be the highest proportion of traders representing over 50% of buyers and sellers in the first half of 2012 with expansion cited as the main driver for those buying. Personal reasons, including retirement, death and divorce were given as reasons to sell by 33% of sellers compared with 25% in 2011. However, debt as a reason for selling, at 11% of all sellers, remains similar to last year.
Buying for investment is up at 27% of all buyers compared to 17% at the same time last year. There has been no significant change in the means of purchase with only a quarter of all buyers primarily funding a purchase with borrowings.
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