Farmland value to see steady growth over the next five years

Rural advisors Savills have predicted a diversity of buyers and varied demands will mean farmland remains in comparatively scarce supply.

As a result, over the next five years, agents predict prime arable land values will increase by an average of 2.5 per cent per year over inflation, while poorer quality pasture will climb by an average of six per cent.

However markets are likely to remain highly localised – and those areas in highest demand could see greater increases.

The forecasts come after a positive year for the farmland market across Shropshire and the West Midlands.

Savills say the value of all types of farmland in the region – arable and pasture – now sits at an average of £8,275 an acre and 6 per cent higher than the national average of £7,815 an acre. This is a 13.4 per cent rise compared to the end of December 2021, when the average was £7,294 an acre.

The value of prime arable land meanwhile is now at an average of £9,823 an acre in Shropshire and the West Midlands, representing a 12.4 per cent increase on the same time last year.

The data also shows that 7,111 acres of farmland were publicly marketed in the region last year – which is a 7 per cent fall from December 2021. In Great Britain as a whole, 128,000 acres of farmland were marketed during 2022 compared with 122,000 acres in 2021, an increase of five per cent.

Rhydian Scurlock-Jones, director and head of office at Savills in Telford, said: “There are currently compelling arguments for selling, buying and holding land, and the right decision is personal in each case.

"But it is worthwhile farmers reflecting on these in relation to their objectives and longer term plans. The average value of farmland is at an all-time high and for those that do choose to sell, the decision could prove rewarding.

“Consequently we do expect more farmland to come to market this year – whether it be investors looking to cash out and release capital, farmers struggling with debt due to increased input costs or those enticed to leave the industry by the Lump Sum Exit Scheme. However, even then, it’s unlikely demand will be satisfied.

“Competition for high-quality commercial farmland remains strong, while environmental motivations continue to provide a buzz, with tree planting, biodiversity net gain (BNG), natural capital, carbon sequestration markets and regenerative farming all resulting in increased interest from investors who want land with potential to secure income from nature-based solutions.

"Rollover buyers will also continue to be a major force, with demand from lifestyle buyers perhaps cooling slightly in line with the housing market.

“Alongside this we expect the taxation benefits and long-term out-performance of inflation to remain significant factors in farmland’s appeal.

"The current gulf between supply and demand is likely to temper any negative impact of the rise in interest rates, with the pent up demand insulating farmland values from the impact of the economic downturn.”

Deals agreed by Savills throughout Shropshire last year include the sale of Ferneyhough Farm in excess of the guide price and the sale of land at Crudginton to Shropshire Homes which will provide new homes and facilitate the construction of a new roundabout on the A442 for public benefit.