Farmland values accelerating
THE average value of farmland is rising at the fastest rate since 2014, land agents have said. According to the latest results from the Knight Frank Farmland Index, the price of bare land rose by almost 4% in the first quarter of this year, while annual growth hit 14%.
This compares favourably with the basket of other investment classes that the estate agency tracks. Only gold, which has seen a typical ‘safehaven’ bounce off the back of the Russian invasion of Ukraine, has performed more strongly over the past 12 months.
Announcing the Farmland Index findings, Andrew Shirley, head of rural research at Knight Frank, explained that a lack of supply and strong demand from a wide range of purchasers, particularly rollover and conservation-motivated buyers, continue to support prices.
The volume of publicly advertised land for sale so far this year is about 50% below the levels seen in 2021, he added. itself an “historically sparse” year.
“Several additional dynamics that could lend momentum to the market have also emerged,” Mr Shirley said. “Following the surge in commodity and energy prices created by the war in Ukraine – around a third of the world’s grain exports are shipped from Black Sea ports – inflation is spiralling and food security has risen to the top of the political agenda.”
He goes on to explain that as many “economic commentators” point out, we are now in a situation some claim is “reminiscent of the 1970s”, when inflation also soared.
“During such periods, investors often seek out assets classes that act as inflationary hedges. Gold is one, but farmland, which generates a steady income stream and is subject to less price volatility, is arguably a better option,” Mr Shirley said.
The Knight Frank Farmland Index tracks the average price of bare (no residential property or buildings) commercial (productive arable and pasture) agricultural land across England.
The quarterly index is based on the opinions of Knight Frank’s expert valuers and negotiators across the country, which take into account the results of actual sales conducted by both the firm and its competitors, local market knowledge and client and industry sentiment.
When combined with statistics from UK Government, the index shows the performance of farmland since 1944.
Mr Shirley concluded: “Values spiked by almost 500% during the ‘70s, so could we see something similar happen now? Probably not to that extent as farmland prices already carry a substantial premium above their productive capacity. However, there is certainly the potential for investors to start looking at agricultural land in a new light as both an insurance against inflation and as a source of environmental and carbon credits.”