Despite rising farmland prices, farmers are fighting back into the market and buying land once more, encouraged by improving commodity prices in certain sectors, according to the latest rural land survey published by RICS (Royal Institution of Chartered Surveyors).

Chartered surveyors have noted that the trend for non-farm buyers, until now accounting for an increasing share of the market, has been reversed, falling to 43 percent from 51 percent at the end of last year. Individual farmer buyers now account for 43 percent of the market, up from 38 percent in the fourth quarter of 2003.

The demand for commercial farms is also rising steadily, with 43 percent more surveyors reporting a rise than a fall, a new five-year high.

According to chartered surveyors, farmland prices averaged £8262 per hectare in the twelve months to first quarter of this year, up 12 percent from the same period last year, compared to a 7 percent rise in the fourth quarter of last year.

The rise in farmland prices continues to be exacerbated by a decline in the availability of land on the market. Much of this can be explained by a lack of certainty amongst landowners about CAP reforms, such as the issue of entitlement on sale of land, despite the Government’s recent announcement on Single Farm Payments.

The volume of sales reported in the first quarter of 2004 dropped considerably from the previous quarter’s 84 percent to just 34 percent, but much of this drop can be accounted for by the usual seasonal weakness. Nevertheless, sales activity is still down substantially in the past year by 51 percent.

Surveyors’ outlook on land prices is very confident, close to a six and a half year high, suggesting that farmland will continue to see strengthening prices in the next few quarters.

RICS rural spokesman and chartered surveyor, Julian Sayers, says:

“Things are changing in the rural land market as the trend seen over the past two years begins to turn around. For the first time since 2002, the influence of non-farmer buyers is decreasing in favour of farmers.”

“This has been brought about by an improvement in the returns for certain sectors and growing certainty regarding the outcome of the CAP mid-term review.”

“Chartered surveyors believe, however, that some farmers are holding back from putting their property on the market until the final implications of the single farm payment regime are known.”

Key facts in the survey:

• A robust national housing market and non-farm buyers continue to support the market, despite a slowdown in sales activity.
• Demand for land from commercial farms and individual farm buyers is on the increase.
• There is a general decline in the supply of land, reflecting uncertainty over the CAP reform’s impact on the market.