Farmland values fall

Knight Frank report that annual growth in farmland values in England has fallend to 27% from a peak of almost 38% in the second quarter of 2008.

* Farms and estates for sale

However, prices falls are slight. Annual growth has fallen to 27% from a peak of almost 38% last quarter although the agency is forecasting further declines over the next 12 months.

Andrew Shirley, head of rural land research at Knight Frank, says: 'The spectacular rise in farmland values has come to a juddering halt after some of the strongest growth ever seen by the market. The value of English farmland, according to results from the Knight Frank Farmland Index, fell by just under 1% in the third quarter of 2008 following growth of 11.9% and 10.4% in quarters one and two respectively.

Mr Shirley points to the dreadful harvest which has made arable farmers - teh strong players in the land market - more cautious. The cost of drying wet grain this harvest has been astronomical for many businesses and harp increases in fertiliser and other input costs have also added to the gloom.

'Lifestyle buyers, especially those from the finance and banking sectors, have also been prominent in the farmland market in recent years, but the credit crunch and global economic crisis means their activity has declined substantially,' continues Mr Shirley. 'According to our prime country house index, the value of farmhouses has fallen by 7.5% over the past 12 months. Selling farms where the bulk of the value is in residential property is becoming much harder.

'Despite this, we are only forecasting a small decline in average values over the next 12 months of between 2% and 5%, although this may be greater for smaller, purely commercial blocks of bare land with limited neighbour interest. There is a still a relatively limited supply of land, which should help ensure farmland prices do not slide as dramatically as the residential market. A number of frustrated buyers, particularly funds, may also see this cooling-off period as an opportunity to get into a market that has previously been too hot for them.

'Although we probably won’t see so many of the headline-grabbing deals of over £8000/acre, which were being achieved earlier this year, it is worth bearing in mind that these sales made up a small part of the market. Land across England still averages only just over £5,000/acre, which is much cheaper than in other European countries like Denmark and Ireland.

'Unless we see a massive flood of land for sale during the rest of the year and into 2009, and there are no signs of this happening despite a modest upturn in the number of farms for sale, the market should remain firm and the best properties will still sell well.'

* Farms and estates for sale