Farmers ready to cash in on soaring land prices

20 August 2008 - Source: http://business.timesonline.co.uk/tol/business/ind

Farmland prices have risen by 50 per cent over the past year to reach a record high, according to the latest market survey from the Royal Institution of Chartered Surveyors.

Some farmers are taking the opportunity to sell up and retire, particularly those feeling the squeeze from the rising cost of fuel, fertilisers and energy. Cashing in is a serious option for those who are unable to operate at a profit.

The fastest rise in prices since the survey began 13 years ago was in the first six months of this year, when the average price per hectare rose from £10,439 to £12,965. Arable land rose from £10,439 to £14,453 and grazing land from £9,929 £11,477.

Richard Macdonald, director-general of the National Farmers’ Union, said that there had been no rush from the land so far, but there was a steady flow. “The current high values certainly make it more attractive for some farmers to decide to sell up and retire. The impact of new regulations and extra costs on farming with no chance of higher returns may also persuade many farmers to seek early retirement,” he said.

The higher values had brought greater optimism to agriculture after years of underinvestment in the land, he added. There was evidence of many nonfarmers acquiring land, while many farms were expanding.

The boom for landowners has been caused partly by a growing demand for grain on the global market, driven by the burgeoning economies in China and India, where the middle classes are eating a higher protein diet.

In Britain land is being sought by investment funds and big commercial farmers, but increasingly there is also fierce competition from Danish and Irish investors and farmers. Prices in their own countries are already very high, so they are looking to this country to build up their land portfolios.

This foreign incursion and interest from financial houses is welcomed by the farming industry because they nearly always contract out the business to land managers and workers, which helps to bolster the rural economy.

This quest for productive land has been tempered by a drop-off in interest from rich lifestyle buyers seeking a country estate as well as an expensive home in a fashionable part of London or the Home Counties. Three years ago chartered surveyors reported a 50 per cent increase in demand for residential farming estates; today that figure has fallen by 3 per cent.

This downturn is a feature of the economic climate, with nervous City workers tightening their belts. Property experts believe that these buyers will continue to retreat from the market for at least another 12 months.

The numbers of farmland sales have also grown in both the residential and nonresidential markets, with the average price achieved being £15,298 a hectare from January to June this year.

Julian Sayers, spokesman for the Royal Institution of Chartered Surveyors, said: “Ever-rising commodity prices have pushed the price of farmland to record highs as farmers and investors compete for arable land. However, the days of the lifestyle buyer are on the wane.

“The credit crunch is putting an end to City expansion into the country as the precarious financial situation has made City slickers rethink their lifestyle priorities.”

 

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