Farmland prices in 'record rise'

Rises in farm land prices came on the back of soaring commodity prices

The price of farmland has risen at a record rate of 24% during the first half of the year, the Royal Institution of Chartered Surveyors (RICS) said.

The leap in the six months to the end of June was the biggest rise since its survey began in 1995, it said.

Farmland now costs £12,965 a hectare on average, which is 47% more than it did a year earlier.

Julian Sayers, of the RICS, said: "Rising commodity prices have pushed the price of farmland to record highs."

When broken down into land type, the cost of arable land has increased by 32% during the first half of 2008 to an average of £14,453 a hectare.

Over the same period the cost of pasture land rose less steeply, rising by 16% to £11,477.

The credit crunch is putting an end to city expansion into the country Julian Sayers RICS

RICS also said city-based buyers were retreating from the market in the wake of the credit crunch.

Mr Sayers said the rising prices meant farmers and investors were competing for arable land.

However, he went on: "The days of the lifestyle buyer are on the wane.

"The credit crunch is putting an end to city expansion into the country as the precarious financial situation has made city slickers re-think their lifestyle priorities."

Purchases by non-farmers, including lifestyle buyers, have dropped by some 10% during the six-month period to account for just 27% of all land changing hands.

This trend meant farmers and agricultural businesses were again the dominant buying force.

Unprofitable farms

Meanwhile, the figures also revealed that demand for residential farmland, which includes property, had fallen for the first time in three years during the first half.

And there is an expectation that the growth in the price of all types of farmland will have peaked during the first half of 2008.

High commodity prices have led to rises in the cost of farming land, according to the group.

Factors such as more expensive animal feed and fuel were making some marginal farms unprofitable to run.

As a consequence, surveyors expect a number of small commercial farmers to find they are unable to carry on, leading to an increase in the amount of land on the market.