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Written by Charlie Jacoby
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Monday, 12 January 2009 16:38 |
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Key highlights of Knight Frank's latest research are: - English farmland values fell by 5% in the fourth quarter of 2008
- On average, prices rose 16% last year
- The average value of agricultural land is £4796/acre, up from £4129/acre a year ago
- Land prices are predicted to fall a further 6% and then level off in 2009
- Farmland will be more resilient to the credit crunch than other property sectors
Andrew Shirley, head of rural land research at Knight Frank, comments: “It would have been amazing if farmland had been able to totally buck the worsening economic climate that has affected all other property sectors. Values have now started to fall after rising rapidly in the first half of 2008 and briefly levelling off in the third quarter of the year. The 5% decline in average values across England during the final three months of 2008 was the largest in the history of the Knight Frank Farmland Index. Overall, however, prices still increased by 16% last year.
“Values rose sharply earlier last year because there was not enough farmland available to satisfy the pool of eager buyers, which included investors and UK and foreign farmers. That imbalance, however, has now shifted with the number of active purchasers significantly reduced.
“Economic problems in their own countries means the flow of Irish and Scandinavian farmers and investors has dwindled to a trickle, despite a favourable exchange rate, while an expected drop in profitability this year is making UK farmers more cautious.
“Those “lifestyle” buyers looking for an attractive rural home have been hit hard by the credit crunch and investors are also struggling to raise funds. Even those buyers with money to spend are standing on the sidelines waiting to see if the market drops further in 2009.
“We are predicting a further average fall of about 6% with prices then levelling off before the end of the year. The farmland market should definitely prove more resilient than residential or commercial property. Despite an increase in volumes last year, the availability of land remains historically low and there is little evidence to suggest a flood of forced sales that could pull prices down dramatically.
“Farmers will still be keen to buy neighbouring “once-in-a-lifetime” opportunities, although no longer at any price. Banks remain largely supportive of agriculture and many vendors will be more likely to withdraw land from sale than reduce prices significantly. There are still significant tax benefits to owning farmland and dwindling returns from cash deposits and a volatile stock market could encourage investors and deal hunters, who were keen not to buy at the peak, back into the market.”
For more, visit resources.knightfrank.com/GetResearchResource.ashx?id=11429
The backdrop to this is falling prices for prime country houses. Knight Frank says they dropped, on average, by 16% during 2008, with a fall of 9% in the final three months of the year. Some of the biggest drops occurred around London A lack of supply meant the most expensive houses recorded the smallest decline. Country house price falls are likely to be more limited in 2009 and buyer confidence is returning to the market as vendors have become noticeably more realistic. |
Rural agency 
