Knight Frank reports rise in value of farmland

The average value of farmland in England and Wales has broken the £7,000/acre barrier for the first time since June 2019, according to the latest results of the Knight Frank Farmland Index.

Prices for bare land rose two per cent in the second quarter of 2021 to £7,065/acre, helping boost annual growth to one per cent – the first positive 12-month movement recorded by the index over the past five years.

Strong demand and historically low levels of supply are helping to support values.

Environmentally minded buyers are becoming particularly active at the moment, report Knight Frank, and a number of Hollywood film stars have even been in touch with the agency's farms and estates team regarding the potential to buy land for rewilding, while those interested in regenerative agriculture are also active.

The potential to earn carbon credits from farmland, not to mention attractive returns from renewable energy schemes like solar PV, is also peaking the interest of institutional buyers.

However, with no significant carbon trading schemes in place yet in the UK, this market is till in its very early days.

In addition, tax-driven buyers looking to rollover their capital gains from land sales for development or compulsory purchase remain keen market players at the moment.

Strong arable and livestock commodity prices have also helped to offset some of the uncertainty surrounding the impact of Brexit, although the longer-term implications of replacing the area-based Basic Payment Scheme (BPS) with the Environmental Land Management Scheme (Elms) are still to play out.

Much will depend on how quickly farm businesses can adapt to losing their BPS cash by becoming more efficient or substituting it with Elms or other environmental payments.

Markets will continue to remain extremely localised, and beneath the headlines the value of farms attracting little neighbourly interest or with limited appeal to eco-conscious buyers may not keep pace with the broader market.