Farmland prices rebounding already, according to Knight Frank Farmland Index
Key highlights:
· English farmland values rose by 3.1% in the second quarter of 2009 following three consecutive quarters of falling prices
· The average price of farmland is now £4820/acre - 5.5% lower than it was 12 months ago when prices peaked at £5100/acre
· Farmers were the biggest purchaser group in the second quarter of 2009, accounting for 52% of deals (48% Q1)
· The fall in the value of farmhouses has slowed significantly and the activity of “lifestyle” buyers increased slightly
· Prices are predicted to rise another 6% over the next 12 months
Andrew Shirley, head of rural land research at Knight Frank, comments:
“There is definitely some more confidence in the market from farmers and to a certain extent investors. The uncertainty that arose from the credit crunch and bank collapses and bailouts last year meant the market ground to a halt in the second half of 2008 and the early months of 2009.
“Now, however, potential purchasers feel able to go back into the market knowing that there hasn’t been a huge glut of farms for sale that could have pulled back prices further. Availability remains at similar levels to 2008.
“Compared with other investment and property sectors (see attached graph), farmland has remained relatively unscathed by the economic downturn. Investors and farmers both believe that the outlook for the agricultural sector is positive and that the current fall in the price of some commodities is a temporary blip in a long-term bull run.
“For arable land we are now seeing deals routinely struck at over £5000/acre and in some cases, where there are special purchasers, at over £6000/acre.
“There are also signs that some confidence is returning to the country house market that has, in the past, significantly supported the price of attractive farms. According to the Knight Frank Prime Country House Index, the average value of farmhouses fell by only 0.3% in the second quarter of the year, compared with falls of 4%, 8.3% and 4.5% in the previous three quarters. On an annual basis, farmhouses are now worth 16% less than this time last year.
“It is too early to say that this marks the serious return of the “lifestyle” buyer, but any improvement in the residential market will have a knock-on impact on the farms market.
“I do not expect farmland prices to increase at the same double-digit rate that we saw in the first two quarters of 2008, but the recovery has started earlier than some people expected and average values should steadily climb back over the £5000/acre mark again in the not too distant future.”