Farmland market stalls as agricultural boom falters and economy tumbles


Date: 30th September 2008  | PDF Version

Key highlights:

Andrew Shirley, head of rural land research at Knight Frank, commented:

“The spectacular rise in farmland values has come to a juddering halt after some of the strongest growth ever seen by the market. The value of English farmland, according to results from the Knight Frank Farmland Index, fell by just under 1% in the third quarter of 2008 following growth of 11.9% and 10.4% in quarters one and two respectively.

“Arable farmers who were strong players in the land market earlier in the year when wheat prices climbed to over £180/t are now more cautious following a dreadful harvest. Feed wheat is now worth under £100/t 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.

“Lifestyle buyers, especially those from the finance and banking sectors, have also been prominent in the farmland market in recent years, but the credit crunch and global economic crisis means their activity has declined substantially. According to our prime country house index, the value of farmhouses has fallen by 7.5% 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% and 5%, although this may be greater for smaller, purely commercial blocks of bare land with limited neighbour interest. 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. A number of frustrated buyers, particularly funds, may also see this cooling-off period as an opportunity to get into a market that has previously been too hot for them.

“Although we probably won’t see so many of the headline-grabbing deals of over £8000/acre, which were being achieved earlier this year, it is worth bearing in mind that these sales made up a small part of the market. 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 despite a modest upturn in the number of farms for sale, the market should remain firm and the best properties will still sell well.


For further information and more detailed UK land values, please contact:

Andrew Shirley,
head of rural property research;
+44 (0)1908 302938,
+44 (0)7779 585 313
andrew.shirley@knightfrank.com

Davina Macdonald Lockhart,
Knight Frank pr;
+44 (0)20 7861 1033,
+44 (0)7796 996 154
davina.macdonald.lockhart@knightfrank.com

Ends

Notes to Editors

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner Newmark Knight Frank operate from over 165 offices, in 36 countries, in six continents. For further information about the Company, please visit www.knightfrank.com

The Knight Frank Farmland Market Index is an opinion-based index, compiled quarterly prepared quarterly by professional staff in Knight Frank’s Farms & Estates Department offices in the UK.

Farmland is defined as agricultural land that has a dwelling and/or buildings located on it. Bare land is defined as agricultural land which does not have either dwellings or buildings located on it.

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