Average values for prime arable land increased by 1.9% to £7,800 per acre across Great Britain during Q1 of this year outperforming the residential performance of prime central London (1.3%) for the same period. This growth exceeds that for the same quarter of last year according to the latest research from Savills.

However, this rate of growth masks some distinct regional variations; in the east midlands values increased by 4.9% while zero growth was recorded in the west midlands and the south west.

Alex Lawson comments, “There continues to be a strong demand from private individuals and corporate buyers for large blocks of commercial unencumbered farmland. Farmland is undoubtedly one of the asset classes of the moment and already this year there have been a number of transactions both on and off-market at figures well in excess of £10,000 per acre.”

The biggest issue currently is the lack of farmland available. For the first three months of this year just 13,100 acres were publicly marketed across Great Britain, which is 28% less than for Q1 2012. Collectively this included 79 farms. Supply volumes were dramatically down in Scotland -71%, -61% in the north of England and -42% in the east of England but up by over half in the east midlands.

Ian Bailey head of Savills rural research comments, “This year the current round of CAP reform may create some uncertainty particularly in Scotland and Wales, which when combined with the extremely difficult weather conditions may go some way towards explaining the lack of land available to date. Also the number of acres trading off-market is already significant this year.

The residential farm model

This year we introduce our residential farm model, which tracks the performance of two very different farm types between 2005 and 2012 and clearly illustrates the increasingly diverse nature of the farmland market.

Since 2005 the total value of the ‘commercial arable farm’ in the east of England has increased in value by 180%, which is largely accounted for by the almost doubling in the farmland value. In contrast the ‘livestock farm in the south west’ has increased in value by just 60%. The changing fortunes of the residential sector since 2008 have hit hard the livestock farm, where the property assets in 2012 account for 44% of the total value (almost two-thirds in 2005) whereas for the commercial unit the residential component represented just over 4% in 2012 (11% in 2005).