The average value of prime arable land rose by 3.2% across Great Britain to just under £7,200 per acre during the third quarter of 2012.
According to our Farmland Value Survey this gives an overall rise of 7.3% since the beginning of 2012 and 8.5% year on year.
Over the past three months farmland values have strengthened most in Scotland with the price of average prime arable increasing by 7.3% to £6,450 per acre. This equates to a total growth of 9.7% in 2012 to September.
In England average prime arable values rose by 3% to £7,250 per acre. A closer look at the regions shows the largest rises were in the South West of England where a rise of 8% was recorded for average prime arable land.
The South East (4.1%), North (3.6%) and East Midlands (3.4%) also witnessed stronger growth in prime arable values. Growth was more muted in the East of England (1%) and the West Midlands (1.4%).
In contrast, Wales reported no change in the value of average prime arable farmland in the last three months. This follows 2.7% growth to £4,750 per acre in the first half of 2012.
Graph 1, which illustrates prime arable values year on year at the third quarter, clearly shows that there is little sign of growth slowing in the arable farmland market.
However, the market is diverse and strong demand in the arable sector is balanced by weaker demand for properties with a significant residential or amenity component.
Supply
Our analysis shows the volume of publicly marketed farmland across Great Britain has fallen by -15% during the first three quarters of 2012 compared to the same period of 2011. Indeed, closer analysis reveals with the exception of Scotland, that all regions experienced a significant reduction in supply compared to the first three quarters of 2011.
In Scotland, the supply of marketed farmland increased by 22% in 2012 compared to the first three quarters of 2011 with 36,000 acres of farmland advertised publicly. This is the largest supply of farmland during the first nine months of the year dating back to 2006.
Across England overall supply fell by -25%. The table shows that the most significant falls in supply were down the eastern side of England, notably the East Midlands, the East of England and the South East of England.
No doubt the strength of commodity prices has played a part but in some cases profits may be under pressure where low crop yields and selling forward penalties might make capitalising some or all of the farm’s assets a worthwhile proposition.
Interestingly, our research shows that just 9,200 acres were publicly marketed in the East Midlands during the first three quarters of 2012 – the lowest level since 2001 when just 8,200 acres were marketed in the same period which was a direct impact of Foot and Mouth Disease.
Graph 2 shows that the market activity is predominantly in the arable and mixed farming sectors. Analysis of the data suggests that a significant proportion of the mixed farms are arable based. Demand remains strong for the farms suitable for commercial arable farming.
As noted in our previous quarterly, ‘Market in Minutes’ Q2 there has been, and continues to be, a significant private market this year. A lack of public stock has forced buyers to seek out private deals.