At 131,000 acres, the amount of land publicly marketed across Great Britain during 2014 was the smallest since our records began in 1995. Compare that to the years immediately following the end of World War II, when we know that around 650,000 acres were traded annually in England alone.

Conversely, multifaceted buyer types fuelled strong demand and Savills Farmland Value Survey shows that the average value of prime arable farmland nationally strengthened by 14% to almost £10,000 per acre in 2014. This follows a 12.3% rise in 2013 and a substantial 277% increase in average prime arable values during the past 10 years.

However, average values conceal regional variations and the farmland market is increasingly diverse in terms of value and the prices achieved. Factors including land quality, position and local demand are key to achieving the best prices.

"We expect further growth in UK farmland values in 2015 but the market will become more diverse"

Farmers, as would be expected, continue to be the predominant buyers of farmland but they are not alone. They are competing with non farmers or ‘lifestyle’ buyers and institutions. For farmers – expanding the farming business remains the core reason for purchase. Buying land, providing it is strategically located, enhances the opportunity for economies of scale and therefore greater influence over suppliers and customers. The use of larger machinery helps to drive costs down and margins up.

We expect further growth in UK farmland values in 2015 but the market will become more diverse and a clear understanding of local market conditions will be critical to buyers and sellers to ensure realistic price expectations are established. There will be factors that are likely to dampen the average rate of growth, which has been a significant feature of this market for the past decade.

Agricultural incomes are inversely correlated to economic growth and continued improvements in the economy will put some pressure on farm incomes and therefore capital and rental values across all types of land and farming businesses.

We are already seeing pressure on commodity prices and this is likely to continue this year, affecting farm profits and cash flows, which may lead to increased supply in some local markets.

Political uncertainty will be a key market factor in 2015. During 2014 the Scottish Referendum and the publication of the Land Reforms had a significant effect on the Scottish market, both in terms of reduced activity and stifled value growth.

The political agenda in Scotland will continue to be of influence this year, but the early indications are of a higher volume of land coming to the market than in 2014. In 2014, 32,000 acres of farmland were publicly marketed in Scotland – a quarter of that recorded in 2000. History also shows that the run-up to a General Election will add a layer of uncertainty to the market.

In conclusion, additional farmland remains an obvious target for business expansion and a key element for diversification and risk mitigation in investment portfolios but equally, following very substantial gains in recent years, the current strength of the market offers an opportunity to release capital.

Taken from
Market Survey: UK Agricultural Land 2015