Average farmland values saw a 2% surge in the final quarter of 2023, according to property consultancy Knight Frank’s Farmland Index.
Statistics show that farmland values broke the £9,000/ac barrier for the first time with an annual increase of 7% putting farmland values on par with gold in 2023, according to Knight Frank.
Head of rural research at the property consultancy, Andrew Shirley, said the findings in the latest Farmland Index underscore the resilience of the farming sector.
“The scarcity of supply, coupled with unwavering demand from diverse buyers, has been instrumental in achieving this milestone,” he said.
Resilience
Knight Frank said the farmland market has showcased resilience on Q4 of 2023 despite high inflation, rising borrowing rates, weak commodity markets and a decline in farm subsidies.
According to the latest research report, the scarcity of supply and persistent strong demand from diverse buyers has played a pivotal role in supporting these values.
The political landscape has also contributed to the stability of the farmland market, according to Knight Frank.
The property consultancy said that Labour’s pledge not to remove agricultural and business property relief in the upcoming general election has provided a sense of reassurance for landowners, and that consequently, forced sales are notably low at present.
Head of farms and estates at Knight Frank, Will Matthews, said: “The absence of forced sellers has certainly created a unique market dynamic.
“A persistent low supply makes it challenging to envision farmland trading at levels below those we’ve witnessed.
“The robust demand and intense competition among affluent buyers frequently pushes values to £10,000/ac, and large blocks can even exceed £15,000/ac.”
Challenges
The increasing cost of finance has become a key factor in prompting some landowners to consider selling, according to the Farmland Index.
Looking ahead, Knight Frank has predicted gradual uptick in prices driven by sustained demand and a modest increase in supply compared to the previous year.
However, the possibility of substantial increases in prices relies on a significant reduction in interest rates, the property consultancy said.
“As we enter 2024, we anticipate continued stability in farmland values, thanks to a balanced market and a lack of excess land,” Matthews said.
“We expect to attract a mix of motivated buyers, which will contribute towards a competitive landscape throughout the year.
“The UK will continue to be a secure investment haven, especially in land, with buyers increasingly drawn to ownership as they look at natural capital as a safe bet.”
