February 23, 2011

UK farmland prices show 11% increase

Investors have seen the benefits of holding farmland during inflationary times, amid an 11% rise in average UK prices last year, according to property consultancy Savills.

The number of new prospective farmland buyers registering with the Savills surged by 45% last year, after being relatively stable since 2006.

In actual deals, the proportion of UK farm purchases sealed by buyers citing investment as their primary motive doubled to 31%.

Institutional buyers accounted for 10% of purchases, compared with 4% in 2009.

The data suggested that investors have woken up to the benefits of holding farmland, Savills said, citing the asset class as a top performer in the past three years, beating UK shares, bonds and residential property.

The stable returns from agricultural property during the past few years clearly show the recession-proof nature of this asset and its value in inflationary environment, according to Savills.

UK inflation was reported last week hitting a two-year high of 4%, and is expected by the Bank of England to reach 4.4% before easing by mid-2012.