In a press release last week, RICS (Royal Institution of Chartered Surveyors) reported that rising commodity prices have lead to an increased demand for commercial farmland, taking prices to a record high.
Chartred surveyors indicated commercial farmers remain keen to expand production to capitalise on elevated commodity prices. This, combined with falling land availability, saw farmland prices rise to all time highs during the last six months of 2010.
During the last six months of 2010, all areas of Great Britain experienced rising farmland prices with the exception of Scotland, where prices fall by 8%. The East Midlands saw the strongest price rises (17%), followed by the North West (12%). Farmland was most expensive in the North West at £17,300 per hectare, while the cheapest was in Scotland at £9,100 per hectare.
Demand continued to strengthen for both types of farmland, but 55% more surveyors reported demand rose rather than fell for commercial farmland, compared to only 6% for residential. This marks the fourth year running where the pace of demand for commercial outperformed residential.
RICS spokesperson, Sue Steer, said:
"The last six months of 2010 saw further strong gains in farmland prices as commodity prices continued to move upwards. Commerical farmers are increasingly keen to purchase prime farmland to expand their businesses, and this strong demand is keeping the market very active. This, combined with lack of supply of good quality land, can only lead to even higher prices over the next 12 months. In comparison, the residential farmland market remains relatively subdued, relfecting the broader national housing picture."
Mike Taylor, Senrior Partner of Barbers Rural, said:
"Prices quite definitely hardened throughout the first half of 2010 but since then we have seen consolidation although no reduction in demand. Prime arable land is very keenly sought after. Pasture land in some locations can be a little less popular.".