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Down on the farm

Catherine Deshayes

The spectacular value of farmland in England has been brought to a halt by a wet harvest, falling commodity prices and increased costs, according to the latest research...

The value of farmland fell by just under one per cent in the third quarter of 2008 following growth of 11.9 per cent and 10.4 per cent in quarters one and two respectively, the Knight Frank Farmland Index shows.

This means that overall annual growth has fallen to 27 per cent from a peak of almost 38 per cent last quarter.

Although there has been a modest upturn in the number of farms for sale and prices are expected to decline further over the next 12 months the market should remain firm, analysts predict.

'The spectacular rise in farmland values has come to a juddering halt after some of the strongest growth ever seen by the market,' said Andrew Shirley, Head of Rural Land Research at Knight Frank.

The report says that arable farmers, who were strong players in the land market earlier in the year when wheat prices climbed to over £180 a ton, are now more cautious following a dreadful harvest.

Feed wheat is now worth under £100 a ton and the cost of drying wet grain this harvest has been astronomical for many businesses. Sharp increases in fertiliser and other input costs have also added to the gloom.

The credit crunch and global economic crisis is also having an effect with lifestyle buyers, especially those from the finance and banking sectors, who have been prominent in the farmland market in recent years, falling off.

Also according to Knight Frank's prime country house index, the value of farmhouses has fallen by 7.5 per cent over the past 12 months. Selling farms where the bulk of the value is in residential property is becoming much harder.

"Despite this, we are only forecasting a small decline in average values over the next 12 months of between 2 per cent and 5 per cent, although this may be greater for smaller, purely commercial blocks of bare land with limited neighbour interest," said Mr Shirley.

"There is a still a relatively limited supply of land, which should help ensure farmland prices do not slide as dramatically as the residential market," he added.

Although the days of headline-grabbing deals of over £8,000/acre which were being achieved earlier this year, is probably over, the report points out that land across England still averages only just over £5,000/acre, which is much cheaper than in other European countries like Denmark and Ireland.

"Unless we see a massive flood of land for sale during the rest of the year and into 2009, and there are no signs of this happening, the market should remain firm and the best properties will still sell well," concluded Mr Shirley.

Source: www.propertywire.com