While average farmland values in the East of England continue to increase year on year, research by Savills suggest growth may be starting to slow as supply increases.
Quarterly analysis from rural property agents at the global consultancy shows prime arable land is now trading at an average of £10,404 an acre in the East – up 3 per cent when compared to the end of September 2022 but 3.5 per cent down compared to the end of June this year.
The value of Grade 3 arable land meanwhile, is sitting at an average of £9,480 an acre – up five per cent on the same time last year, but 3.6 per cent down compared to three months ago.
Poor arable land is trading at an average of £7,959 an acre, up 18 per cent compared to the end of September last year, but down 5.5 per cent compared to the end of June this year.
The value of all land types – arable and pasture – sits at an average of £9,605 an acre. This is five per cent up on the same time last year, but a drop of three per cent in the last three months.
Oliver Carr, associate director in the rural agency team for Savills operating in West Suffolk, Cambridgeshire, Hertfordshire and Bedfordshire, said a number of factors were impacting values and they remain highly localised.
“Farmland values in the East of England are 17 per cent above 2020 levels and also remain higher than the national average, with values of prime arable and grade three pasture now around £10,200 and £7,000 per acre respectively across Great Britain,” he said.
“This has largely been driven by continued pent-up demand from buyers motivated by business asset rollover relief and natural capital investors which have so far insulated the market from wider economic factors and sustained overall value growth.
“There is a lot of variation depending on location, land grade and farm type. For some, farmland competition is also beginning to weaken where the pool of buyers has reduced following acquisitions by those with rollover relief funds and as investors take advantage of guaranteed rates of return from bank interest rather than less predictable alternative investments. However, prices are generally still up on last year.
“Additionally, interest rates are affecting financing costs meaning neighbouring landowners may find it difficult to fund purchases. Levels of supply have also started to increase, with more opportunities to purchase larger-scale commercial farms this year, while at the other end of the scale, higher interest rates have triggered some smaller-scale sales to raise capital.”
According to the Savills survey, a total of 16,500 acres of farmland have been publicly marketed in the East of England so far this year. Although this is 7.8 per cent down on 2022, it is higher than 2021, 2020 and 2019.
Of the land marketed this year, 5,768 acres were in Norfolk, 4,518 acres in Suffolk, 2,327 acres in Essex, 2,312 acres in Cambridgeshire, 1,410 acres in Hertfordshire and 133 acres in Bedfordshire.
Will Radbourne, part of the rural agency team at Savills in Essex, said the amount of farmland being openly marketed could well increase next year as farmers make more informed decisions about the future of their business.
“The agricultural transition is progressing and it is now clearer what the new agri-environment schemes such as Environmental Land Management and the Sustainable Farming Scheme will require or incentivise – and the degree of financial reward these will provide,” he said.
“Consequently, farmers can now make more informed decisions about the future of their business and property, which in some instances may involve retirement and sale.
“Additionally, high costs of production combined with increased interest rates have put a strain on some businesses, perhaps accelerating retirement plans.”
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