The farm land market in the UK saw an east west divide last year as prices in East Anglia increased by 19.4%, according to the latest analysis from Savills.
Average farm land values across the country are expected to grow at around 6% per annum over the next five years, but there will be significant variations in the rates of growth with the best performance being quality driven.
Overall there was a diverse mix of active buyers whose motives for acquisition were varied, but for the majority of these buyers the land choice and location were similar, the report says.
The high sale prices for prime arable land in East Anglia averaged just under £10,000 per acre last year, but there was weaker or zero growth for either predominantly livestock farms or those with a high proportion of the guide price tied up in the residential element.
‘In housing terms we often hear the phrase north/south divide for the farmland market last year it was a case of an east/west divide. Prime arable land in the East has outperformed the rest of the country reflecting the buying power of arable farmers and the flight to commercial quality by investors,’ said Alex Lawson director of Savills farms and estates team.
Analysis of the types of buyers in the market last year shows farmers continue to represent about half of all buyers, but since the recession the mix of first time farm land purchasers who are making a lifestyle purchase is 15% compared with 42% at the peak of the market.
Overseas buyers accounted for 8% of all buyers of which half were from the European Union. This is some way off the 20% recorded in the mid 2000s when the Danes invested heavily particularly in the eastern counties.
The report also reveals that the overall profile of sellers is also fairly static, although the number of debt related sales is now up at the highest level since 1996, when interest base rates were 10%. Farmers accounted for the majority of debt related sellers but there was evidence of non farmers with off farm business interests seeking to release capital.
In historical terms land values rise significantly when there is pressure to feed the population. A good example is the period between 1937 to 1950 which included the Second World War and created the need for greater output. This resulted in a 50% increase in arable area, guaranteed prices and assured markets bringing with it a revival of interest in agricultural prospects with a sellers market being established for vacant possession land. During this period land values increased over 230% from £24 to £80 per acre.
This pattern has been regularly repeated since 1960 with policy changes, which boost income prospects also creating an environment for rapid capital growth.
However, the GB farmland market is not alone and across the world farmland values continue to grow. The firm’s global farm land index shows an average global annualized growth since 2002 of just over 20%, while the UK equals 13%.
The highest growth rates were recorded in the emerging markets of Romania, Hungary, Poland, Zambia, Mozambique and Brazil, a trend the firm expects to continue.
For the mature markets growth has remained healthy, from over 7% to as much as 20%, especially when compared with alternative property assets.
The Savills Farmland Value Model, based on historic data back to 1975, shows that the current trend for rising average values recorded over the past 11 years is likely to continue.
This article was republished with permission from Property Wire.