Sharp increase in demand for farmland pushes prices up

The price of farmland has trebled during the last ten years, as demand is outstripping supply, according to a report by the BBC.

The Royal Institution of Chartered Surveyors (Rics) has carried out a Rural Land Market Survey which reveals that farmland now costs an average of GBP7,440 per acre, a significant increase over the asking price of GBP2,400 per acre in 2004. The value of farmland continues to rise as farmers are said to be purchasing more land in order to increase production, while further demand from investors is also helping to push the land prices up.

The Rics figures indicate that although wheat prices have dropped this year, many farmers are expanding as they are eager to take advantage of the growth in commodity prices. Farmland is also reportedly being snapped up by investors that include wealthy individuals, as well as pension funds and sovereign wealth funds.

According to Rics, the price of farmland could exceed the £10,000 per acre over the next two to three years. Its research has also shown that north-west England is the most expensive place to farm in the UK, where land prices have risen by 35% in the last six months to GBP8,813 per acre. However in Scotland, land prices are an averages GBP4,438 per acre, but even that amount is a new record.

The BBC added that the price of food is not expected to be affected by the rising price of farmland, as global production levels and the quality of harvests are more likely to impact upon food prices.