The average value of arable land is set to reach an all-time high by the end of the year, according to Carter Jonas’ latest Farmland Market Update.
Pasture land has already reached new heights of £7,683 per acre in the second quarter of 2023, while arable land is averaging £9,517 per acre – a year-on-year increase of 6.4% and just £650 behind the all-time high of £10,167.
The best arable land is selling in excess of £12,000 per acre, with demand outstripping supply and investment and rollover buyers in contention.
However, the firm adds that market dynamics will impact the price that sellers can realistically expect, with limits on how far buyers will go. Greater land availability is allowing buyers to be more discerning over what they invest in, while higher borrowing costs will limit the ability to secure debt.
Andrew Chandler, the firm’s head of Rural Agency, said: “The market is not completely sheltered from the broader economic situation, as those buying with a large amount of debt are likely to be hesitant.
“The increasing cost of borrowing may also mean that more land comes to the market as farming businesses reassess their cashflows and release capital from existing assets. But, with a waiting pool of capital and demand showing no signs of slowing, we can expect that increased supply would be met with healthy interest.
“It is evident that scale, location and diversity remain key to many buyers. For the right assets, very strong values are being achieved, and this is reflected in our research figures. But there are hotspots and not-spots – if a farm or land doesn’t tick the right boxes, valuations need to be realistic.”
For pasture land, the previous record was £7,611 per acre. This was set in 2016 when both pasture and arable land reached a peak.
“Average pasture land values have now recovered from the losses seen from mid-2016 until early 2019,” said Sophie Davidson, senior research analyst at Carter Jonas. “Average arable land values still remain marginally behind its peak in Q2 2016 but, if it continues its rate of growth, could surpass it by the end of the year.”
An influx of agricultural ground has brought much-needed supply to the market in the past three months. Over 42,500 acres have been publically marketed in 2023, an increase of 16% over the first half of 2022.
Carter Jonas states that cash buyers are still driving the market, holding rollover funds to invest in suitable land.
The uplift in values has been seen in nearly all regions, with the south west and south east performing particularly well.
“There have been increases in the amount of silt and fen land in the East being traded, pushing average values up 11.1% in the 12 months to quarter two 2023,” added Ms Davidson.
“Upland values in the North and Yorkshire and the Humber have shifted upwards too and are now 13.2% greater than the same quarter last year, aided by the reassurance received this quarter by upland farmers on access to government schemes.”
For more information go to www.carterjonas.co.uk