January 2011 - The East Midlands Farmland Market

by Rupert West FRICS and Mike Holland MRICS

With the volume of farmland transactions noticeably lower than in 2009 scarcity undoubtedly has played a contributory part in the major up surge in land values over the past year.

Brisk and competitive bidding for all but the least attractive land parcels has characterised the 2010 market, pushing average prices back to peak levels only briefly seen during the relatively short lived peak of 2007-8; ending up perhaps 15% to 20% on the year.

It is fair to say this has surprised most commentators, but once again the upsurge corresponded with another rise in arable commodity prices; and it will be interesting to see if this apparent connectivity remains when (rather than if) input costs rise, as suppliers rush to share in the good fortune of their farming customers!

Perhaps.  But underlying the continued strong land market we believe is a longer term optimism for the future of food and energy production, particularly in comparison with other non-land industries in an uncertain post-recessionary economic climate.

This is borne out by the essentially investment-based sentiment which we have encountered amongst purchasers and prospective purchasers; whether they be active farmers, or institutional, corporate and private property investors – all of whom were active during the year.

Our predictions for 2011? Whilst we doubt the year ahead will see such sharp rises in bare land values, we see no signs yet of an overheated market. As before, we are still awaiting a return of buoyancy to the residential farm market, and surely that day is now not too far away!