Capital value of farmland forecast to grow.

Savills have reported that the capital value growth of UK farmland is forecast to outperform many commodities markets, residential property, UK gilts and West End offices.  They expect the average value of farmland in the five years from 2012 to increase by 36%, with average growth of 5% in the first 12 months.

This forecast growth follows a substantial rise in average farmland values over the past five years (138 per cent), which was significantly greater than that recorded for either residential or commercial property or equities.

Alex Lawson, director of the firm’s Farms and Estates said: “We expect the continuing tightened supply and low interest rates to maintain values for all but the worst quality land.

“Our forecast for next year follows more muted growth than originally expected for 2011. We predicted average growth of 9.7 per cent for all land types in 2011, whereas the average was 5.7 per cent, which included a stalling in growth during Q4 for all regions except Scotland and the east of England.”

This average, however, masks the strong demand for the best arable land, which recorded growth of 8.9 per cent.

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