Following the release of the H2 2011 RICS Rural Land Market Survey last week, Andrew Pearce MRICS, Head of Rural Agency at Chesterton Humberts reflects on the factors which led to increasing land prices in 2011 and what this means for the sector in 2012.

“As the RICS Rural Land Market reveals, the second half of 2011 saw land prices reach an all-time high driven by stronger commodity prices, easier access to finance for the agricultural sector and increasing demand for land from farmers as well as investors.

“Whilst the sector continues to flourish and a limited of supply of farmland comes to the market, coupled with a worldwide concern over the increasing global population, a lack of food security, political unrest and international water shortages are all going to have an effect on food and water resources, we are expecting the demand to acquire more land in the UK to increase.

“Fully equipped arable holdings with a low level residential element and a commercial appeal have been in the highest demand in 2011. The number of lifestyle buyers actively looking for residential farms and estates under 200 acres decreased in 2011 causing prices for these types of properties to plateau, however they are returning to the market.

“In the last few months demand has increased for the heavier Grade 3 arable land which has not been affected by drought, as over the last 3 years this quality of land has produced better yields and outperformed some Grade 2 land affected by the dry summers we have been experiencing. This interest in Grade 3 cereal land has driven prices up, and we don’t see this trend changing in the near future, particularly with the prospect of another dry year in 2012.

“As the ownership of farmland provides a safe haven in these current turbulent economic times, both for investors and farmers, we expect the number of sales and available stock to remain tight during 2012 and for prices of commercial arable farmland to increase by 5% - 8%.