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Both bare and equipped land values are at historic high levels.  Bare land values rose 6% in the final quarter of 2012, while equipped land values remained unchanged.

The average value of English farmland reached £9,100 per acre in 4Q2012.  It has risen by 5% since the start of 2012, compared with an increase of 14% during 2011.  Smiths Gore forecast a rise of 7% in 2012; equipped land values were weaker than we expected although bare land rose strongly.

"Bare land values have risen strongly, by 6% in the final quarter and by a total of 17% over 2012. By comparison the performance of equipped properties was weaker in 2012, with values holding constant in the final quarter, and increasing by a total of 3% during the year.", says Giles Wordsworth, Head of Farm Agency at Smiths Gore.

"Looking at their relative performance over recent years we can see that bare land has been the better investment, increasing in value by 46% over the last three years and 57% since the start of the recession in 2008. By comparison, equipped values have increased 34% over the last three years and by 15% since the start of the recession."
 

Farmland has performed well compared with other investments, such as residential property (+1% in 2012) and commercial property (2.6%, based on IPD UK Monthly Property Index for all property).

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"Only 11,300 acres were marketed between 1 October and 31 December 2012, 15% less than in the same period of 2011."

"The volume of agricultural land marketed during 2012 was the lowest on record. There has never been less than 100,000 acres marketed before", says Dr Jason Beedell, Head of Research at Smiths Gore. A total of 90,500 acres were marketed in 2012, which is a 30% reduction on the 2011 total (128,900 acres).

"The agricultural land market has been reducing in size for many years.  In the 1970s we were consistently seeing over 400,000 acres per year marketed.  In the 1980s the average was 325,000 acres, which dropped to 250,000 acres per year in the 1990s".


 
Outlook

"You might expect that high prices would tempt more landowners to sell; however, other factors may have a stronger influence on the market during 2013. Our previous analysis has shown that the amount of land for sale reduces before a reform of the Common Agricultural Policy; the historic low experienced in 2012 continues to support this observation. We know now that the launch of the next generation of the Common Agricultural Policy is delayed until at least January 2015, so the reform’s influence on the market is likely to be prolonged." notes Dr Jason Beedell, Head of Research at Smiths Gore.

"However more fundamental issues may affect the market over coming months, as the debate concerning withdrawal or reduced involvement in the European Union continues. If the UK’s eligibility for CAP funding were to end, it is difficult to imagine the UK government offering support at the same level. Consequently a reduction in farm incomes could be expected, which is likely to have a small negative effect on land values.  But this is highly unlikely."

Our forecasts for 2013 are:

Average value of English farmland up +7%, according to our statistical model of the market.  However, this may be bullish and the rise could be lower.  We expect bare land prices to increase faster than equipped land.
Less than 100,000 acres for sale again as there are few forced sales and landowners wait to see the detail of the CAP reform.  The main risk to this forecast is landowners selling at what they believe to be the top of the market; if they do start selling there is likely to be a rush and some of the top level premiums will no longer be available as high end demand is sated.


 
Detailed figures for 4Q2012

All farms
67 farms and parcels of land over 50 acres were marketed in 4Q2012, which is lower than the number marketed during the same period of both 2011 (70 properties) and 2010 (70).

The amount of land for sale in 4Q2012 was lower than in 2011.  11,300 acres were marketed in 2012 compared with 13,200 acres in 2011. However, there was more land available in 2012 than in 2010 when just 9,900 acres were marketed in this period.

Equipped farms (Farms with buildings)
45 equipped farms were marketed in 4Q2012, compared with 50 in the same period of 2011 and 47 in 2010.

16% less land was marketed (8,700 acres) than during 2011 (10,400 acres), whilst 13% more land was marketed than in 2010 (7,700 acres).

Bare land
22 parcels of bare land were marketed in 4Q2012, compared with 20 in the same period of 2011 and 23 in 2010.

The area for sale was 9% lower at 2,600 acres, compared with 2,800 acres in 2011, and 17% higher than in 2010 (2,200 acres).

The South West region, as usual, was the most active region in terms of the numbers of sales and acres marketed during 4Q2012.

These figures from Smiths Gore’s Research department are based on all sales of publicly marketed farmland in England over 50 acres and exclude sales where the residential value of the sale is greater than 50% of the total.