Last year farmland across Great Britain was in high demand from a wide range of buyers, and with supply volumes severely restricted many transactions were highly competitive.

Historically, farmland has performed well in times of economic uncertainty providing a good hedge against inflation. We only need to wind back the clock to the aftermath of the GFC to see this in play. Between 2008 and 2013 average farmland values in GB increased by 90 per cent during a time when average annual supply levels were around 150,000 acres compared with fewer than 125,000 acres during the past three years.

Our analysis of buyer types during 2021 shows farmers continue to be the dominant force in the market at 46 per cent. The Agriculture Act and The Environment Act combined with a steady flow of new grant opportunities have provided a degree of much-needed clarity for the sector. There is now evidence of a renewed interest from the institutional and corporate buyer who in 2021 accounted for 16 per cent of buyers in the GB farmland market, compared with the 10-year average of 10 per cent.

Only 122,400 acres were brought to the market, a similar volume to that recorded in 2019 and only a small increase on the record low of 2020. In fact, 2021 saw the lowest number of acres advertised publicly in England. The sustained lack of supply is driving values higher as more active purchasers compete in an already crowded market.

Results from the Savills Farmland Values Survey show the average value of ‘all land types’ climbed 6.2 per cent during 2021. This is the strongest annual growth since 2014. It is pasture land that is leading this, with poorer quality livestock land and average quality livestock land increasing 8.8 per cent and 8.7 per cent respectively since December 2020. By comparison, prime arable and Grade 3 arable land grew 4 per cent and 5.5 per cent respectively.

The growth in land values across the full spectrum of farm types and qualities is a signal of the change in attitude towards investing in farmland. However, the market continues to exhibit a significant amount of variation. While factors such as property quality have an influence on the price a property achieves, a factor which influences the interest of individual farmer buyers – location – is not as constraining for institutional and corporate buyers.

It is easy to see why the farmland market looks attractive at the moment. Not only has the asset performed steadily during the Covid-19 pandemic, but global food systems will also need to provide an additional 20,500 trillion calories by 2050 to meet the demand of rising global populations and changing diets according to the UN FAO.

Furthermore, it isn’t just the demand for food that is going to increase. The environmental targets set by governments and companies will require the use of a quarter of the UK’s land to change, by calling for more renewable energy, biofuels, and biodiversity, to name a few.

The pressures on farmland to provide so many ecosystem services mean demand is unlikely to abate in the near future, leading to more value growth. Savills predicts that poor quality livestock land will continue to outperform other land types, with 6 per cent real capital growth annually. For prime arable land, commodity prices in the short term look set to hold and an increasing interest in energy crops and renewables may continue to support profit from production. We expect this to support growth, estimated at 2.5 per cent annually excluding inflation, in the short term.

Further information

Contact Andrew Teanby or Alex Lawson

What is rural land worth?

Spotlight: The Farmland Market – 2022

Contact Savills Land Valuation