Changes to the value of large blocks of arable land mean they have overtaken prices for prime central London residential property, according to new figures.
The research conducted by Knight Frank as part of its new farmland investment index, showed that over the last 10 years the value of arable blocks with investment potential (more than about 1,000 acres) has risen 228%, while the value of prime housing in central London has only gone up 135% As a result such farmland has now hit an average price of £12,500/acre.
However, values since March this year have not increased and Frank Knight have said this indicated that prices might be starting to level out. Tom Raynham, head of the agricultural investment team at Knight Frank, said: “The demand for agricultural investments has risen beyond the market’s expectations and is attracting private, institutional and corporate investors alike.
“The institutional investor has come back with greater resolve in the past 12 months following the sale of the Co-op Farms’ portfolio and now has a greater understanding that although values might fluctuate, the underlying asset is never depleted if managed properly.
“More land is coming to the market and greater portfolios are being put together.”
Andrew Shirley, head of research at Knight Frank, said that the introduction of high net-worth individuals from mainland Europe, pension funds and smaller institutions to the market had blurred the lines between farming buyers and investors of 1,000-acre plus arable blocks.
He added that arable land in East Anglia had traditionally been the most in demand from investors, but that Hampshire had seen a surge in interest and Scotland begun to be recognised for offering greater value.