Despite continued economic uncertainty, average land values continued to grow in the final quarter of 2022. It was the seventh consecutive quarter of growth, seeing arable land in England and Wales rise to £9,223 per acre, an increase of 1.3% quarter to quarter.
Pasture land also increased, although at a slower rate. Values reached £7,472 per acre, an increase of 0.3%.
“Year-on-year growth has been decelerating since the start of the year, but still continues to climb at a moderate pace,” said Carter Jonas head of farm agency, Andrew Chandler. “When compared to Q4 2021, average arable land values have increased by 4.5% and average pasture values by 4.3%.
“Longer-term growth remains strong across all types of land. When annualised over a 10-year period, arable land has increased at a rate of 2.8% and pasture has grown by 3.5%.”
Prime agricultural land continues to be sought after, with year-on-year values rising by 6.1% to an average of £10,961 per acre across England and Wales.
“Prime arable land values continue to be bolstered by demand for quality domestic food production, arising from an expanding awareness around sustainability, health and nutrition,” Mr Chandler said.
The influx of natural capital investors has also led to lesser quality hill and upland values increasing significantly in the last 12 months, boosted by 23%. While average lifestyle land values grew by 5% to £15,792 per acre – the highest level recorded by Carter Jonas.
“A robust 10-year annualised growth rate of 4.4% for lifestyle land has been driven predominantly by substantial growth in the South East and West Midlands, with these regions seeing 10-year annualised growth rates of 7.3% and 7.4% respectively,” explained Mr Chandler.
“There are still sizeable obstacles that will challenge the sector in 2023, notably changing subsidies, the increased cost of borrowing and the impact of prolonged input price inflation.
“Yet a steadier political backdrop and sustained demand from an array of buyers is likely to inspire confidence and benefit land values across England and Wales.”
While supply is reportedly below the long-term average, there were 10,435 acres on the market in the final quarter of 2022, an increase of 16% from the third quarter.
“Historically, low levels of available land coupled with a growing range of purchasers has helped to maintain pressure on agricultural land values across England and Wales,” Mr Chandler said.
“Debate continues to intensify about how to balance the dichotomy of land being taken out of food production for environmental purposes and a need for domestic production.
“Over the coming year, this will serve to keep the agricultural land market tight, with innovation and bringing land back into production from other non-agricultural uses increasingly necessary in the medium term.”
The company acknowledges that there will be challenges in the coming months, with a rise in interest rates and the subsequent surge in the cost of finance, however, Mr Chandler remains optimistic.
“Businesses and individuals have become less inclined to borrow across all property asset types and those with debt will experience decreased liquidity,” he concluded. “Yet, the prominence of cash buyers and rollover funds in the market is likely to mean that land values are less exposed to increasingly expensive debt.”