11 April 2013, The sluggish economy and appalling weather conditions have put real pressure on farm incomes. However, prime arable land is forecast to increase by 5 per cent by the end of 2013 according to the latest Agricultural Land Indicator from Carter Jonas.
Despite a challenging year for farmers and landowners, food security and supply and demand dynamics are driving strong price growth in the prime farmland market
Demand for lower quality land fell in 2012 and this decline is forecast to continue over the next 12 months. Values of secondary arable land will be subject to increasing downward pressure and it is predicted that values are expected to fall 5-10% during 2013.
“Provided that the supply of openly marketed land remains around current levels, circa 150,000 acres, the value of prime arable land will increase by 5 per cent by the end of the year,” comments Catherine Penman, head of Research, Carter Jonas.
This is significantly below the unprecedented price increases witnessed between 2009-2011, where prime agricultural land values almost doubled. It is now evident that upward pressure on land prices has abated due to current difficulties facing the industry- yet speculation over a price bubble should be treated with caution.
Most importantly, it is the safe haven status of British agricultural land, which is almost on a par with the Prime Central London residential property market, along with the favourable taxation regime, which will continue to drive demand for this asset class. But Penman warns the existence of a coalition government may put pressure on the favourable tax status of agricultural land as the Conservatives turn away from their instinctive immunisation of the asset to gain quick political capital by targeting the landed community.