Investors flock to put money into farms

INVESTORS are putting their money into farmland, seen as a safe bet in uncertain times, a new index shows, pushing values back up to a peak last seen in 2015.

The Knight Frank Farmland Index for the third quarter of 2022 shows the average value of agricultural land has risen and now stands at levels recorded in the autumn seven years ago.

Prices for bare agricultural land rose by 1% to just over £8,300/acre in the third quarter of this year, taking annual growth to 13%. Against a backdrop of mounting global economic uncertainty, exacerbated in the UK by Kwazi Kwarteng and Liz Truss’s badly received mini-budget at the end of September, farmland outperformed all the other asset classes that Knight Frank tracked during the past three months. Over a 12-month period it was only just beaten by gold.

“It seems that once again farmland is continuing to perform its traditional safe-haven role, acting as a potential hedge against inflation supported by ongoing demand from tax and environmentally driven buyers,” the company said in a statement.

“Ms Truss’s growth agenda and mooted planning reforms could also see more farmland required for new developments and infrastructure,” the statement went on. “However, price growth is starting to slow with the latest quarterly uptick the weakest since the beginning of 2021.”

Experts in the sector says that agriculture is facing major challenges, despite the rising value of land. Energy and fertiliser costs are spiralling, while traditional area-based subsidy payments are set to be phased out.

Some of the lost income could potentially be replaced by the new Environmental Land Management Scheme (Elms), although questions have been raised over the roll-out of the programme and the rates on offer. Doubts have also been raised about the government’s commitment to the environment, although ministers insist they remain committed to existing targets.

Andrew Shirley, head of rural research at Knight Frank, said: “Given the continued imbalance between supply and demand, which shows little sign of unwinding, I predict we will still see farmland values hit a new high, albeit by a small margin, by the end of the year.’’