Shortage of farmland send prices to an all time high

A shortage of farmland, sent prices to an all time high in the last half of 2010, according to RICS, The Royal Institute of Chartered Surveyors.

The RICS report indicated that commercial farmers are currently keen to expand production to capitalise on over inflated commodity prices. This in combination with declining land availability resulted in prices rising to all time highs during the last six months of 2010.

The transaction based measure of prices, which includes residential land, stood at just under £17,000 per hectare, while opinion based, which covers just bare land, approached £14,500 per hectare. Both prices measures rose by roughly 6%, the RICS Rural Land Market Survey which covers England, Wales and Scotland shows.

During the last six months of 2010 all areas of Great Britain experienced rising farmland prices with the exception of Scotland, with prices there falling by 8%. The East Midlands saw the strongest price rises, up 17%, followed by the North West at 12%.

Farmland was most expensive in the North West at £17,300 per hectare, while the cheapest land was in Scotland, priced at £9,100.

Demand continued to strengthen for both types of farmland, but 55% more surveyors reported demand rose rather than fell for commercial farmland, compared to only 6% for residential. This marks the fourth year running where the pace of demand for commercial outperformed residential. Residential farmland demand remains more subdued, as it broadly reflects the national housing picture.

Given the lack of land availability currently available surveyors expect the recent trend in farmland prices to continue over the coming year, with a strong growth in the commercial market but a flatter trend in the residential sector.