Steady UK values eclipse other assets
Published 03/05/2011 | 05:00
The most recent Knight Frank Farmland Report has found that farmland in Britain is outperforming other assets as values for land hit a record high.
The report, which covers the first quarter of this year, shows that farmland values rose by 3pc in the first three months of the year and are now 11pc higher than 12 months ago. This means the average price of agricultural land in England is now almost £6,000/ac (€6,700/ac), which is a record high. The report further shows that farmland has performed far more strongly than many other asset classes over the past 10 years.
Tom Raynham, of Knight Frank's farm sales team, believes the resilience of agricultural land is part of what makes it such an attractive investment and values should continue to rise steadily this year.
"When you look at the performance of other investments such as the FTSE 100," he says, "the farmland market has been far less volatile and survived the credit crunch in better shape. That hasn't been lost on private investors and we have noticed more interest in good quality arable land and farms, especially now commodity prices have also started to increase."
While high net worth individuals seem to enjoy owning land because of its amenity value, tax-planning benefits and as a long-term hedge against inflation, Mr Raynham is convinced that now this cohort of landowners and potential landowners are starting to look more carefully at its potential to generate an annual return as well.
"Demand also continues to outstrip supply, with relatively few potential sellers keen to test the market at the moment," said Mr Raynham. "Ironically, we have buyers across the country crying out for good properties. If interest rates rise it will be interesting to see whether more farms are put up for sale, but at the moment there are no signs of any significant increases this year."
Clive Hopkins, Knight Frank head of farms and estates sales, agrees: "Shortage of supply is also affecting the market for country estates, despite the current economic uncertainty.