FARM expansion and interest from investors helped drive up farmland prices by four per cent in the last quarter, according to property consultant Knight Frank.

Between July and September farmland outperformed residential property, even that in prime central London, and was only marginally behind the five per cent hike in the price of gold.

Demand from farmers, lifestyle buyers and investors, coupled with historically low availability, is helping to push up prices.

Tom Raynham, head of Knight Frank’s agricultural investment acquisitions team, said: “We are seeing a steady increase in the number of enquiries from individuals and funds, both in the UK and overseas, looking to diversify their investment portfolios.”

Mr Raynham has just helped an overseas investor to acquire an arable unit of more than 800ha (2,000 acres). Large blocks of good arable farmland, preferably over 400ha (1,000 acres), are most in demand and are making between £20,000/ha (£8,000/acre) to upwards of £24,900/ha (£10,000/acre).

Capital growth is a key driver for investors.

Prices have risen by 222 per cent during the past decade and are predicted to rise by at least five per cent annually over the next three years. Investors, however, are also looking more closely at annual yields.

Mr Raynham said: “From what I am seeing now, people start to get very interested if there is also the potential for additional income from the likes of renewable energy or a diversified farm business.”

Land price highlights included: n The average value of farmland in England rose by four per cent in the third quarter of 2013 to £16,628/ha (£6,678/acre) n This was the strongest performance in a three-month period since the second quarter of 2010 n This figure takes growth over the past 12 months to seven per cent