Agricultural Land

The price of agricultural land is rising at its fastest rate for more than 30 years. Because of the global credit crunch, wealthy city dwellers and overseas buyers seeking a slice of idyllic rural England are rushing to move their money out of stocks and shares. In 2007 so-called lifestyle farmers, city traders and investors, bought more arable and grazing land than career farmers. In contrast to falling residential and commercial property values, the average price of farmland rose by more than 10 per cent in the first quarter of 2008, with arable land in particular becoming so profitable that its average price has soared from £4,000 an acre in January last year to £5,500 an acre today.

The price of wheat and other cereals has more than doubled in 12 months. While that means the cost of food is going up, it has also improved the profitability of arable farming and made it an attractive investment. At the same time, Britain's agricultural land is attracting interest from abroad. Elsewhere in Europe, such as Denmark and Ireland, for example, arable land is already worth more than double than that in Britain. Consequently buyers from these countries are heading over here to cash in on the boom. Studies are showing that while the Irish tend to favour farmland in the west of England, northern European buyers are looking increasingly to East Anglia.

New research has shown that agricultural land prices in Great Britain have risen by 58% in the last ten years from an average of £2,290 per acre in 1995 to £3,630 in 2005, double the increase in retail price inflation over the period. Regionally, Wales has seen the fastest rise in agricultural land prices over the past decade with a 92% increase whilst the East Midlands experienced the lowest of 16%. Land prices in the West Midlands are the most expensive with an average price of £4,713 per acre followed by the South East where prices are £4,532 per acre. Scotland has the lowest agricultural land prices with an average price of £2,813 per acre, 40% lower than in the West Midlands. Dairy farming land is usually the most expensive agricultural land in Britain at £3,722 per acre which is 2% higher than the average for arable farming land. Mixed farming land is the least expensive at £3,143 per acre.

Land investment is not a new phenomenon. Significant wealth has been created through land Investment by individuals who understood the concept of buying and holding investment land in the path of growth. Essentially there are two types of agricultural land, arable and pasture and grazing land. Arable affords a higher price than pasture and grazing because its supply is more limited. Its suitability to be used for arable purposes is determined by soil type, topography, climate and physical location. Strategically located agricultural land is the key target for private investors. However, supply of this kind of investment land continues to fall, thereby ensuring its expeditious and rapid growth in value.