Rural assets continue to outperform alternative assets despite economic uncertainty remaining a real issue, and the eurozone question remains far from answered. However, it is this uncertainty that has a positive effect on values and enhances farmland’s reputation as a safe haven from economic storms. As Graph 1 illustrates, apart from a significant correction in the credit crunch, the prime central London market correlates closely with farmland.

Both markets have a ‘safe haven’ characteristic and strong investment performance plays a part in both assets, although farmland’s tax benefits add an additional appeal factor.

This ‘safe haven’ factor and the fundamental demand on a finite amount of land for food and fuel to sustain an increasing and wealthier population competing with non-farming activities are providing underlying support to global farmland values and are likely to continue doing so.

Supply

The supply of farms coming to the market will be crucial. Graph 4 (below) shows a declining trend line since 1998 for the amount of farmland publicly marketed across Great Britain, although this has leveled off during the past 10 years.

As noted above, we do not expect any significant change in the overall levels of supply, which will help support average growth in farmland values. However, there may be debt pressures in the livestock sectors due to rising costs, which may increase supply in a market, where demand is relatively weak.

It is unlikely interest rates in isolation will have a significant effect in the short-term, as the consensus of opinion is that any base rate rises will be limited to below 2% in the next five years. Any rises may be a contributory factor if combined with other business pressures.

In contrast, healthy commodity prices will limit the supply of good quality commercial farms. Interestingly, there has been no significant change in the mix of farm types publicly marketed during the past five years. Arable and mixed (mainly arable/livestock) represent around 60% of all activity both by area and number of farms (see Table 4 below).