Cost of farmland increased 2% to £6,783 an acre as commercial farmers expand production of cereals to take advantage of rising prices
The constant rain and lack of sunshine that damaged crop harvests last year have failed to dampen rural land prices, which reached record levels in 2012, according to a report by the chartered surveyors body RICS.
The cost of farmland increased 2% in the second half of 2012 to £6,783 an acre while farmland with one or more homes on it increased by the same percentage to £8,520.
RICS said prices were driven primarily by the demand from commercial farmers "who remain keen to expand production given high agricultural commodity prices in many sectors", despite a poor harvest in 2012.
Land prices have risen sharply since 2009, when a commodity price shock sent wheat and barley prices spiralling. Cereals have remained highly prized on world markets and remain the driving force of the demand for rural farmland, said RICS.
"Price increases are being driven predominately by commercial farmers, who remain keen to expand production given high agricultural commodity prices in many sectors," it said.
Prime agricultural land has grown strongly while less fertile land has been left behind. Part of the reason is the collapse in sheep and lamb prices, which have fallen following an influx of cheap imports from Australia and New Zealand. Many sheep farmers have been forced to sell up at distressed prices.
According to the latest figures from the Department for Environment, Food and Rural Affairs, cereal prices increased by 38% in 2012. By contrast, sheep and lamb prices have fallen 28% since November 2011.
But an influx of foreign and City investors, keen to safeguard their money during a period of economic turmoil, have also pushed up prices after a period when many quit the UK land market.
A recent report by the estate agents Savills forecast that prices will grow 40% over the next five years on average, a trend that will mirror the rise in prime residential land in central London, it said. The highest rises were in the east of the country and the south west. East Anglia topped the price charts at £8,074 an acre.
Germans remain one of the biggest foreign investors alongside Irish and Greek investors.
Savills said another reason for the jump in values was the lack of land coming to market, reducing the supply at a time of bouyant demand.
It said 134,000 acres of land was marketed across Britain in 2012 compared with 155,00 the year before, a 14% decline.
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