The price of farmland in the region has soared to record levels and is expected to tip £10,000 for an acre in the next two or three years, market experts say.
During the first six months of the year, the cost of farmland in Yorkshire and Humber jumped to £7,000 per acre, bringing the value to almost three times what it was during the same period in 2004, when an acre in the region cost just over £2,613.
The exponential growth in prices, revealed by the twice yearly RICS Rural Market Survey, has been driven by the ongoing surge in demand for land from both farmers and investors.
Sue Steer, RICS rural spokeswoman, added: “The growth of farmland prices across Yorkshire and Humber in recent times has been nothing short of staggering. In less than ten years we’ve seen the cost of a square acre of farmland grow to such an extent that investors – not just farmers – are entering the market. And, if commodity prices continue to increase and keep demand high, there’s no reason at all why we won’t see the cost per acre going through the ten thousand pound barrier in the next two to three years.”
Interest from potential buyers started to steadily grow at the beginning of 2006, RICS say, with hikes in commodity prices leading a charge to expand agricultural operations and, as a result, investors are increasingly seeing land as an economic safe haven.
With bare farmland so sought after, the six months to June saw availability of such farmland remain flat. Across Great Britain, land prices were highest in the North West at £8,813 per acre, while the cost per acre was lowest in Scotland at £4,438 per acre.
Tom Whitehead, senior associate at property agents Carter Jonas in Harrogate, said: “The regional market has surged into activity since mid-May with a good mix of bare land and equipped farms of varying calibre now available. Reasonable quality bare arable land in blocks of 50 to 150 acres is highly sought after commanding a 20 per cent to 50 per cent premium over ‘average’ prices, with weaker demand for farms with a strong residential element or in less fashionable districts.”
Respondents to the professional body’s survey in Yorkshire and Humber expect the trend of rapidly growing farmland prices to continue over the coming year with a net balance of 67 per cent more chartered surveyors predicting further growth.
Barney Kay, regional director of the National Farmers’ Union, said big investment funds listed on the stock exchange had invested capital in farmland since 2008 as a result of the economic crash.
He said: “For many in the industry, high land prices provide a stronger basis against which to invest in infrastructure and machinery but for those younger people entering the industry and looking to expand it makes it a lot harder to buy land.”
Chance to reduce arrears?
Farmers who are struggling after inclement weather last summer and earlier this year could use high farmland prices to boost their finances, says Andrew Black, rural expert at Savills in York.
Mr Black says: “While large farm businesses may have the reserves or borrowings to cope, smaller enterprises may struggle. Sale and leaseback could be a very sensible option to consider. Investors need someone to farm their asset, so farmers can generate capital by selling and continue with a livelihood that they love.”