Farmland values bounce back as investors seek better return

Figures released today by the Royal Institution of Chartered Surveyors showed that during the second half of 2009, low interest rates drove investors to look for alternatives.

The institute said strong demand for farmland, combined with a shortage of supply, caused prices to rise during the six months to the end of December, after falling slightly during the first half of the year.

Overall, 31 per cent more surveyors reported a rise in demand for commercial farmland during the six months, than those who saw a fall, up from 22 per cent during the first half of the year.

A similar pattern was seen two years ago when there was a spate of purchases by people from urban backgrounds who were keen to try farming as a hobby or to buy a second home in the country.

This new wave of demand is being driven by investors, according to the group's bosses, with people seeing farmland as a stable venture after prices remained resilient during the recession.

The current low interest rates being offered has also caused them to turn to alternative assets in a bid to get higher returns.

In particular there is also strong demand for additional land from established farmers keen to capitalise on rising livestock prices by acquiring land nearby, so they can expand their existing operations.

RICS spokeswoman Sue Steer said: "Those with land are loath to dispose of it, and those without, or with a limited supply, are keen to get into the market and capitalise on its rising value."

Going forward, surveyors said expected a continuation in the current shortage of land being put up for sale and therefore a further pushing up of prices.