Rising commodity prices and increased demand could drive farmland prices in the United Kingdom substantially higher in 2011, according to industry analysts. Farm land prices already rose substantially in 2010, as foreign buyers increased their investments in the sector. See the following article from Property Wire for more on this.
Property buyers and investors in the UK farm land sector can expect prices to increase by an average of 6% in 2011, according to analysts.
The predicted increase in values will follow an 8% increase in 2010 but there is expected to be a widening gap in value growth between the best and poorest quality land, with expectations that where there is purchaser competition values could easily increase by 12% next year.
The predictions from Savills also include an expectation that demand for this low risk, income yielding asset class is gathering momentum. An increasingly diverse mix of potential purchasers are often in competition with farmers who are looking to expand.
This growing demand, in part driven by strong commodity prices, against a lack of supply is leading to more competitive bidding situations for the well located blocks of good quality combinable cropping land, it says in a new report.
Its research shows that the proportion of buyers with funds between £2million and £10million to spend increased during 2010 compared with the previous three years. The interest from foreign investors particularly in the East of England has increased this year with inquiries from Italian, Indian, German and Chinese nationals.
‘In line with our research I think prices will continue rising next year, as every bit of bad news on the global economy or problems in the euro zone will give fresh impetus to investors looking for a home for their cash while interest rates remain low,’ said Christopher Miles, head of Savills farm sales in the East.
‘Strong commodity prices will also give strength to the investment rationale and to farmers looking to expand. Rising prices will be seen by some as an opportunity to offload poorer farms although we will see a marked variation in prices paid. Good commercial farms are the flavor of the moment and premiums will be achieved for 1,000 acre plus units,’ he added.
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