Strutt & Parker has said farmland is remaining “extremely resilient” despite rising interest rates and a squeeze on farm profitability.
The property consultancy’s latest Farmland Database shows the average price of arable land sold so far during 2023 is £10,900.
This is lower than the £11,100/ac reported for HI 2023, but is the same as the 2022 average – which was 15% higher than 2021.
The Strutt & Parker database also revealed that, since 2000, arable farmland has outperformed the commercial and residential property sectors, and equities, delivering an annualised return of 7.8%
The value of arable farmland has risen by 29% over the past 10 years and by 351% over the past 20 years.
Head of estates and farm agency for Strutt & Parker, Matthew Sudlow, said: “Although it appears the growth in values has slowed in some locations, this is only because there have been fewer sales at £12,000/acre or more.
“Our analysis shows that 60% of the arable land traded in England this year has still sold for more than £10,000/acre, compared to 33% in 2021, highlighting the continued strength of the market.”
Demand for farmland
Sudlow said the feeling amongst agents is that demand is more variable for farmland than it was a year ago, but prime farms in popular areas of the country continue to sell well.
Buyers include farmers with rollover money to spend, private individuals, the investment sector and green investors.
“We’re also seeing some significant purchases from a handful of overseas buyers, who like the fact it is easier to buy at scale in the UK than in some other European countries,” he said.
“The UK’s appeal is being enhanced by our farming industry’s enthusiasm for adopting regenerative farming techniques.”
Traditional farmer buyers have accounted for around 40% of transactions so far in 2023. Historically, this figure tends to be 50-60%, Strutt & Parker said.
Supply rose in Q3 of this year, taking the total amount brought to the open market in England during the first nine months of the year to 65,600 acres, which is 9% above the five-year average.
There also continues to be “plenty of activity” on the private market, the consultancy said, but overall supply remains constrained in historical terms.
Positive outlook
Sudlow said the outlook for the coming year remains positive, although greater polarisation in values is a possibility.
“With demand becoming more variable, location is once again becoming an increasingly important factor in determining the price,” he said.
“The expectation is that the market is set to remain buoyant in the perennially popular areas of the country, such as the Cotswolds and counties close to London, and in other parts of the country where there are existing landowners looking to upsize.
“However, farms in traditionally less popular regions focused on productive farming may struggle to achieve the same level of interest as they would have seen last year.”
Levels of supply remain a talking point in the industry, Strutt & Parker said, with questions being asked about whether there could be a noticeable rise in the volume of land available, if farmers decide to sell up in the face of a difficult harvest, high input costs and falling Basic Payment receipts.
“While this is clearly a possibility, there is little hard evidence that it is happening yet,” Sudlow said.
Overall, the sentiment is that farmland remains a solid investment prospect, with a proven track record of capital growth, for a range of buyers, he said.
