3 February 2015, Farmland values increased by 2.5% over the last six months to the end of 2014. This rise disguised a growing and more distinct regional variation, with values in the South and East of England achieving values of circa £14,000 whilst the South West witnessed values of £9,000 per acre. Location, type and quality remained key factors in achieving prime values together with the strength of the local market.
The supply of land remained increasingly restricted, with a total of almost 120,000 acres being openly marketed across the UK in 2014, a 15% decrease from its previous year’s level. As a result of the tightening supply of openly marketed land, the volume of off market sales increased significantly during 2014, accounting for a third of all Carter Jonas transactions in 2014 as clients increasingly considered seeking out private deals in order to gain exposure within the sector. This trend is expected to continue and will help to sustain the continued capital value growth forecast during 2015.
Demand became increasingly localised across the farmland market during 2014, with lot sizes over 1,000 acres proving most attractive. The diversity of demand for agricultural land is clearly illustrated in the chart above, with farmers accounting for the highest proportion of transactions completed by Carter Jonas during 2014 at 28%, closely followed by lifestyle (24%) and investors (20%).
Andrew Fallows, partner in Carter Jonas’ national farms and estates team, said: “The halo effect surrounding London remained significant and is expected to build momentum during 2015 as the Capital continues to thrive in performance and remuneration levels are set to outpace inflation. The halo effect is particularly prevalent in the country house market with a maximum of 50 acres, although holdings with larger parcels of land continue to benefit, albeit to a lesser extent.”
“The inevitability of increasing interest rates, currently predicted to occur in the second half of 2015, is also expected to impact the general tone of the land market and our forecasts predict that average land values will increase 3% during 2015.”