Increased supply and rising prices: here are some of the key findings for the GB farmland market in 2023.

Supply of farmland increased

By the end of June, 85,400 acres of lowland farmland were launched onto the public market in Great Britain, which is 16 per cent more than the same period of 2022, and the most since 2018. This exceeds the half year 10-year average of 84,300 acres. If during the remainder of the year the acreage marketed continues its upward trajectory, the year-end total could reach 152,000 acres, which means supply will have recovered to its longer-term average a year earlier than we forecast in our Cross Sector Outlook in January.

Volume of smaller farms for sale on the rise

The number of 50-to-100-acre parcels of bare lowland offered for sale has substantially increased. Analysis of the first six months of each year shows from 2009 to 2021 across GB, when interest rates were consistently low, an average of 55 farms were launched. In contrast, the average for 2022 and 2023, since interest rates have started to rise, is 79 farms, an increase of 44 per cent. This difference has been particularly notable in the North where the average has almost doubled from 10 to 19. 

Average values for prime arable land at an all-time high

Prime arable land across every home nation is now the most valuable it has ever been at £10,200 per acre, with the highest average values recorded in the north of England. Farmland values continue to rise and the overall average farmland value in Great Britain increased by 3.7 per cent during the first half of 2023.

Grade 3 pasture across GB is now averaging £6,800 per acre with the highest values for this land type recorded in the southwest of England. There continue to be wide price variations either side of average values.

Capital gains rollover funds support demand

Well-equipped commercial farms and significant acreages of bare arable land are often being bought in competition by buyers with capital gains rollover funds who have a time-sensitive window for investment. This demand has helped support values and there have been cases where the prices paid are significantly more than the current averages recorded in our farmland value survey. It will be interesting to monitor how current levels of demand play out during the rest of the year, as those motivated by rollover relief acquire the properties that they need and investors can achieve guaranteed rates of return from bank interest as opposed to alternative investments.

Renewed interest in the agricultural investment sector

Since the end of 2021 interest and confidence is renewed in the market for agricultural investment properties let on longer-term leases. Evidence from the first half of 2023 indicates that guide prices for these properties are in most instances being exceeded, despite improving supply, and private investors are generally the most active and competitive buyers.

These buyers are following a patient capital approach, consciously giving up the opportunity for higher interest rate returns in the bank, for the longer-term prospect of land value growth and a capital gain when the secure tenancy ends.

Competition for land is currently leading to increases in average values, but base rates climbing to higher than expected levels could reduce demand and lead to a more restrained rate of value growth over the next year or two. Historically, the Bank of England base rate and GB farmland values have been negatively correlated. We’ll be closely monitoring how the balance of supply and demand plays out over the coming months. Undoubtedly, sensible pricing is key to a successful sale.

Further information

Contact Alex Lawson or Andrew Teanby