Agricultural land outperforms gold

FARMLAND values outperformed gold in the first quarter of 2010 albeit at a rate slightly below inflation.

Land values increased by about 1.5% while gold prices fell by almost 2% during the same period. Allowing for inflation, the real value of farmland fell by just over 1%, while the value of gold fell by more than 4%.

But land agents Savills anticipates growth in both commodities will comfortably outstrip inflation by the end of the year with gold and farmland continuing to be good hedges against inflation.

Farmland activity in the eastern counties accounted for just under half of all the acres marketed during the first quarter of the year, according to Christopher Miles, head of Savills farm agency in East Anglia.

Some 43% of all land publicly marketed was in the eastern region, but despite this, values like elsewhere continued to rise. “While values have risen for all land types, the gap between the best and the worst is widening.”

Good quality land in high demand areas is now fetching up to £8,000 per acre on the back of strong demand whilst poorer land in less popular locations is nearer £4500 per acre.

Savills Farmland Value Survey shows that the average rise in value for an acre of Grade 3 arable land during the first quarter was, at 1%, below that of inflation. Non-farmer buyers are showing renewed interest in farmland.

Combined with continuing low interest rates, Savills expects farmland values to gain momentum, with expected annual growth of 5-6%. Cash buyers now represent over 60% of applicants registered with Savills to buy farmland. Most of these applicants are looking to purchase a property of up to 200ha (500 acres).