Most Britons still think of land prices in acres but there is more reason to think in metric as the average price of land in England broke the £20,000 per hectare barrier for the first time.

Prices have continued to rise – for the seventh quarter in a row – due to the small amount of land for sale.

Supply of land for sale rises overall – but less bare land available

Although there was a flush of land marketed in the first half of the quarter, supply dropped back sharply in the second half to just 5% more than a year ago. Although constricted supply remains the dominant factor in the market place there has been a more subtle change in the type of supply.

While the overall amount of land for sale rose slightly, the amount of bare land dipped by 9% by area or 17% by number of sales compared with a year ago. This was more than compensated for by a rise in the amount of equipped farms for sale, up 8% by area and 12%
by number of sales. Most of this increase is arable farms for sale and can be attributed to owners cashing in on high commodity prices and sentiment in the sector.

"There has been a 30% increase in the area of arable land for sale compared with last year - 20,700 acres in the second quarter of 2011, compared with 15,900 acres in 2010", says Giles Wordsworth, Head of Farm Agency at Smiths Gore.

"Given normal demand and supply at work in a market, this change in supply would suggest that bare land values should rise more than equipped ones as there is less supply. However, the opposite has happened."

Equipped farm values rising faster than bare land

Equipped farm values grew faster than bare land values in the second quarter and over the last 12 months, so a reverse of what was happening between 2008 and 2010. Equipped farm values rose 4% in the second quarter and so have grown by 8% since the start of the year and by 20% in the last 12 months; compare this with bare land values, which have risen by 2%, 6% and 11% respectively over the same periods.

Part of the reason for this is the greater proportion of arable farms for sale but also the areas in which the farms are for sale; there were a greater proportion of South Western, South Eastern and Eastern farms for sale than before, and these regions have some of the highest values.

"We do not think that prices have peaked. Our farmland model suggests that prices will continue to rise as the wider UK economy starts to grow again. But the main driver of the market remains the balance of demand and supply – supply has not yet grown enough to satisfy strong demand from farmers and non-farmers", says Giles Wordsworth.

All farms

255 farms and parcels of land over 50 acres were marketed in 2Q2011. This is 6% more than the same period last year (241 farms) and 13% more than during the equivalent period of 2009 (225 parcels marketed).

55,700 acres were marketed in 2Q2011, which is more than in 2Q2010 (52,800 acres), and less than 2Q2009 when 57,800 acres were for sale.

Equipped farms (Farms with buildings)

210 equipped farms were marketed in 2Q2011, compared with 187 in the same period in 2010.

8% more land was marketed (48,700 acres) than during the second quarter of last year (45,300 acres). The area marketed was comparable with 2Q2009 when 48,600 acres were
brought to market. Average unit size this quarter was 233 acres which was slightly smaller than the 242 acre average for 2Q2010.

Bare land

45 parcels of bare land were marketed in 2Q2011, which is less than the same period in 2010 (54 properties).

6,800 acres were marketed in 2Q2011, 9% less than in 2010 (7,500 acres).

Our regional valuers would be pleased to give your more information about the land market in your region or county. Please do not hesitate to contact them:

North East Iain Welsh, Darlington Office (01325 370500)
North West Simon Waller, Preston Office (01772 663122)
Yorkshire and Humber Sam Tydeman, York Office (01904 756303)
West Midlands Harry St John, Oxford Office (01865 733304)
East Midlands Giles Wordsworth, Oxford Office (01865 733302)
East of England Bennett Swayne, Newmarket Office (01638 676748)
South East David Slack, Maidstone Office (01732 879053)
South West Simon Derby, Taunton Office (01823 445036)