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Farmland value reaches record high
FARMLAND value in England has reached a record average high of £9,100 per acre, with equipped farmland in the south beating the national figure at £10,000 per acre.
The average value of farmland in England rose by almost three per cent last year, according to the Knight Frank Farmland Index.
This takes growth over the past five years to more than 50 per cent, and the ten-year increase to more than 200 per cent.
Unsurprisingly, given the summer washout that badly affected harvests, all the growth in farmland values came in the first half of the year. Prices remained virtually flat in the second six months.
A fall in the supply of good farms for sale, coupled with an increase in demand from private investors, helped to keep prices stable and farmland values are expected to increase by around five per cent in 2013.
More land may come to the market as some more highly-geared producers with one bad harvest in the barn and another in the ground decide to call it a day. However, there is unlikely to be the kind of glut that could pull back prices.
An increase in availability, particularly of good blocks of arable land, could actually benefit the market with more stock for potential buyers to choose from and bid for. There will, however, continue to be strong regional variations.
Areas that are attractive to buyers from outside the locality are likely to remain hot spots but, in areas where demand is mainly driven by neighbouring farmers, smaller, less productive parcels of land could prove harder to sell.
It has also recently been announced that the ongoing reforms of the Common Agricultural Policy will not now be implemented until 2015, a year behind schedule. This delay should not affect the farmland market as it seems likely that the current system of farm support payments is likely to remain, albeit with a greater emphasis on the delivery of environmental benefits. Although equities did outperform farmland for the first time since the credit crunch last year, the global economic recovery is still sporadic and farmland is expected to remain an attractive investment asset over the coming years.