Rise in farmland prices

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Arable farmland prices rose in the second half of 2009 within the south west, as land once again became an attractive investment, and landowners’ reluctance to sell pushed supply to exceptionally low levels, says RICS latest rural market survey.

58% more chartered surveyors in the south west saw demand for commercial land rise rather than fall in the six months to December last year. This is compared to 31% nationally and was up regionally from 43% in the previous half year and demonstrates the growing appeal of land as an asset class.

Demand for residential farmland in the region also started to pick up, with 13% more surveyors reporting it rising rather than falling, in stark contrast to the first half of the year when 17% more reported it to be falling.

Demand is coming from speculators who view farmland as a stable investment, reflecting the fact that prices have remained resilient throughout the recession. In addition existing farmers are also looking to capitalise on an improvement in livestock prices and greater optimism surrounding the prospects for agriculture by acquiring land close by.

Meanwhile, those with land are keen to hold on to it and as such very little is coming on to the market, which is helping to drive up prices further. The net balance of surveyors in the south west reporting falling rather than rising availability of land stands at 46% for commercial land and 38% for residential farmland, compared to 40% and 43% respectively nationally.