The cost of farmland in South West England rose last year as demand continued to outstrip supply, a new report has found. The region saw a marginal increase of 18,100 acres (3%) of land available for sale but competition bolstered prices, according to real estate firm Savills.
Over the year, there was an increase of 8.6% in the cost of prime arable land in the South West - to £9,950 per acre - with good-sized and quality blocks often achieving considerably more.
Nationally, there were 127,900 acres of farmland publicly marketed in 2022 - the most since 2018 and an increase of 5% on the previous year. Relative to historic activity levels, supply for the farmland market in Britain remains low and continues to have a "significant influence" on the market’s performance, Savills said.
“The market is certainly busy with commercial farming buyers looking to expand as the required scale of agriculture increases but also with rollover buyers looking to relocate or replace land sold for development," said Geoff Jones of Savills rural agency team in the south.
"We have also seen a surge in buyers looking to invest in farmland in order to take advantage of the tax benefits as the wider economy falters slightly, as well as those looking for alternative uses such as rewilding and agroforestry. Nutrient neutrality continues to be a watch word across the region."
Despite the modest increase in supply last year, the demand for farmland remains high and the gap in supply and demand underpinned 8.7% growth of prime arable land values across Britain to £10,000 per acre. The value of poorer-quality pasture land experienced the largest increase in value during 2022, climbing by 12.4% to a record of £5,000 per acre.
Savills said with inflation anticipated to fall this year, it expects real values for prime British arable land to increase by an average of 2.5% per year - and poorer-quality pasture by an average of 6% per year over the next five years.
"The farmland market across the south performed well in 2022 with the supply of land marginally up on 2021. The lack of quality opportunities, in terms of commercial viability and scale, meant that there were a number of hotly contested sales and fantastic resulting sale prices," added Mr Jones.
“Looking ahead, we believe 2023 will perform similarly to 2022 with a slight increase in availability but not enough to meet demand. Existing landowners should be in a good position having taken advantage of the strong commodity prices achieved last year, rollover buyers will continue to be active as their deadlines loom and the increasing demand from natural capital buyers should keep prices moving in an upwards trajectory, if not quite as steep as previous years."
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