Posted by: davidgarnerconsulting | March 11, 2010

Investors fuel farmland cost spike

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The price of farmland rebounded during the second half of 2009 as low interest rates caused investors to look for alternative homes for their cash, research has shown.

The Royal Institution of Chartered Surveyors (RICS) said strong demand for farmland, combined with a shortage of supply, caused prices to rise during the six months to the end of December, after they fell slightly during the first half of the year.

But unlike two years ago, when the cost of land was pushed up by ‘city slickers’ who were keen to try farming as a hobby or buy a second home in the country, the current wave of demand is being driven by investors, who see farmland as a “stable investment”.

The RICS said a strong demand for additional land from establsihed farmers, who were keen to capitalise on rising livestock prices by acquiring land nearby, had also helped drive the price upwards.

RICS spokeswoman Sue Steer said: “When prices were rising two years ago it was mainly being fuelled by hobby farmers, buying up rural retreats with City bonus money and inflating the market.

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“However these latest results indicate that it is now farmers looking to expand and investors who see it as a viable business or investment class that are fuelling the rise in demand.”

Overall, 31% more surveyors reported seeing a rise in demand for commercial farmland during the six months, than those who saw a fall, up from 22% more during the first half of the year.

Demand for residential farmland, such as land with a farmhouse, also started to pick up during the period, with a balance of 1% of surveyors reporting increased demand, compared with 30% more who saw a reduction during the previous six months. At the same time, 40% more surveyors reported a drop in the availability of commercial land, while 43% more said less residential land was coming on to the market.

The shortage of supply led to the price of land, based on transactions, rising by nearly 8% during the second half of the year to £16,381 per hectare.

Surveyors expect a continuation in the current shortage of land being put up for sale to further push up prices.

Click to download your FREE Farmland & Agricultural Investment Guide.

Source: Press Association

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