Agricultural land values in England rose by 1% in 2021, fuelled by a shortage in the number of farms and estates for sale and the growing range of buyer types interested in farmland, according to land and property specialists Strutt & Parker.
Matthew Sudlow, head of estates and farm agency for Strutt & Parker, says the increase in 2021 follows a 3% rise in prices in 2020 and comes despite farmers currently experiencing reductions in their support payments, supply chain disruption and increasing costs – a cocktail which is expected to reduce the returns from farming in 2022.
“The farmland market is strikingly robust, which may surprise some people given the well-publicised squeeze on profitability that farmers are currently facing.
“Farmers still buy more than half of farms which are sold, so they are a crucial part of the market. However, the reality is that most of the farmers who bought land in 2021 funded it either with rollover money or income generated from diversified enterprises.
There’s also a growing list of other buyer types who are interested in investing in farms and estates for reasons which do not always relate to farm profitability, adds Matthew. “These include lifestyle buyers looking to secure a slice of the countryside, private investors who see land as a safe asset in which to store their wealth and companies and individuals looking to buy land for environmental projects such as rewilding or tree planting.”
Analysis of Strutt & Parker’s Farmland Database, which records the details of all farms, estates and blocks of publicly marketed farmland in England over 40ha (100ac) in size, shows just 22,257ha (55,000ac) came to the market in 2021, the second lowest amount on record.
Only 192 farms were publicly marketed, which is also the second lowest number in the past 20 years, he adds.
“If we look back to the mid-2000s, over 300 farms were regularly marketed each year, so we can see there has been a significant contraction of the market,” explains Matthew. “For anyone looking at a farm over 405ha (1000ac), the choice has been particularly limited, with only six farms of that scale publicly available last year. And while a growing number of vendors did choose to sell privately in 2021, the rise in off-market transactions will only have partially offset the fall in public sales.”
Matthew says demand has been keenest for the largest farms because of their scarcity, but there is also evidence to suggest strong demand for properties priced up to £1.5m.
“This may tie in with the rising number of lifestyle buyers seeking to switch from urban to rural living. There have been fewer residential farms available in 2021 than usual, which means those which have come forward have tended to sell well. For example, one 40ha (100ac) Cotswold farm recently on the market with Strutt & Parker for over £3m attracted over 30 viewings and quickly sold for more than its guide price.
“One of the other significant trends in 2021 was demand for land suitable for environmental projects. We noted last year that we were getting lots of enquiries from buyers looking for land suitable for tree planting, carbon offsetting and other conservation projects. This is now starting to translate into purchases, with green buyers active in both lowland and upland England.”
Looking ahead, Matthew says that in the short term market conditions are likely to remain unchanged. “It seems unlikely there will be any slowing of demand. When our agents returned after the New Year break, the phones were immediately busy with potential buyers wanting to know what farms and estates we might have available in the coming weeks and months.
“We’re also not expecting the availability of farmland to increase significantly in 2022. There’s no evidence at present that the policy changes currently being implemented are prompting farmers to sell.
“Although farmers will have received a smaller payment through the Basic Payments Scheme (BPS) at the end of 2021 and are also facing significant rises in input costs, this is being offset by higher commodity prices.
“With supply tight and demand firm, we therefore expect average prices to continue to nudge upwards in 2022.”