Falling farm price trend will be reversed over next year, says RICS

Survey highlights "huge variation" of sale prices in the region

David Coulson
David Coulson

Demand for farmland in the North East continued to outpace supply in the final six months of 2014, as the average cost of land dropped to £6,250 per acre, compared with £7,000 this time last year.

According to the latest RICS/RAU Rural Land Market Survey H2 2014, the second half of year saw the average cost of arable farmland in the region dip to £7,500 per acre, down from £8,000 in 2013. The cost of pasture farmland, meanwhile, went from £6,000 to £5,000.

The region was unusual in this sense as farmland prices in the most of the country rose slightly.

However, experts expect it this trend will soon be reversed and that buyers will begin to see gradual increases over the next 12 months.

This is despite anecdotal evidence that the recent fall in commodity prices is starting to temper the pace of demand, particularly when it comes to smaller areas of land.

According to survey, the increase in demand from so-called ‘lifestyle’ buyers that began in H2 2013 continued throughout the whole of 2014 across most of the UK.

This is adding to price pressures and is supporting the expectations of further price increases.

Anecdotal evidence also indicates continued strong demand from investor purchasers in pursuit of larger parcels of prime land.

According to surveyors in the North East, average arable land rents remained relatively flat during 2014 at £130 per acre, while average pasture rents increased modestly to £100 per acre, up from £95 during the first six months of the year.

Chairman of the RICS Rural Professional Group, David Coulson FRICS of Addisons Chartered Surveyors said: “The continuing shortage of quality farms continues to distort the market in the North East.

“There is a premium for quality farms and bare land but demand for other land in the region has eased slightly.

“We have experienced a huge variation in sale prices across the North East with a variation of as much as 30% for arable land.

“Upland hill farms lacking decent buildings can be difficult to sell too as stock needs to be wintered when brought down from the hill. Small parcels of grassland under 10 acres have been making substantial prices, with many well in excess of £10,000 per acre.”

Neal Thompson FRICS of Edwin Thompson in Berwick upon Tweed said: “There has been remarkably little land sold on the open market in this area over the last 12 months.

“The pace of land value increase is likely to slow down slightly as three years of modest profitability tempers farmer demand.

“Good quality, well-located parcels of land with a restricted residential element are likely to continue to grow in value.”

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