The average price of bare agricultural land in England and Wales hit a new all-time high of £9,250 per acre in the first quarter of 2024, according to the latest Farmland Index from global property consultancy Knight Frank. According to the firm’s latest Q1 Index, farmland values witnessed a 1% rise over the previous quarter, taking the annual rate of price growth to 6%.

 According to the firm’s report, farmland values outperformed other major asset classes over the 12-month period, including the FTSE 100 (+4%), UK house prices (+1%) and prime central London residential properties (-2%). Only gold, with an 11% increase, fared better than farmland.

 "The farmland market has remained remarkably resilient amid economic headwinds," said Andrew Shirley, Head of Rural Research at Knight Frank. "Our research highlights that low supply volumes combined with strong demand from a wide range of buyers, including those looking to participate in environmental schemes are supporting prices."

 Knight Frank’s Farmland Index Q1 2024 report reveals a number of drivers helping to support farmland values in the first quarter. These include increased government funding for environmental land management programmes. Continued buying activity from those with rollover tax liabilities to mitigate is also applying upward pressure on prices. Supply remained constrained in Q1, with limited publicly marketed land for sale. Additionally, the recent HMRC announcement that land enrolled in environmental schemes does in fact still qualify for Agricultural Property Relief on inheritance tax, has provided reassurance among landowners.

 Shirley adds: “Recent clarity from the Government has certainly added some confidence. However, the market remains a little uncertain. The loss of the Basic Payment Scheme may now be starting to bite, which could boost supply. Additionally, the anticipation of a general election may slow down market activity, as both vendors and buyers adopt a 'wait-and-see' approach until there is more clarity."

 Looking ahead, Knight Frank points out that the phasing out of EU farm subsidies and generally lower commodity prices could weigh on the market. However, the fundamental supply demand imbalance is expected to keep prices within a narrow range.

 Will Matthews, Head of Farms & Estates at Knight Frank said: "Despite short-term challenges like subsidy reforms and fluctuating commodity prices, the underlying fundamentals driving demand for agricultural land remain very favourable. With limited supply, farmland continues to be an attractive asset class that can provide a hedge against inflation and exposure to the growing environmental marketplace. We anticipate ongoing investor interest in 2024, especially from those seeking to participate in biodiversity and climate initiatives on their land.”

 The Knight Frank Farmland Index has tracked the value of commercial agricultural land since 1944.