This report covers the period January 2008 to June 2008

Agricultural land and property - General Overview

The H2 2007 Rural Survey raised the possibility of a decoupling between residential and commercial agricultural land demand during 2008. This was predicated on the view that the residential sector’s fortunes (unlike the commercial sector’s) are tied more closely to the credit crunch than to world commodity markets. Subsequent developments have vindicated this assessment.

In the residential sector, demand for agricultural land remained essentially flat during the first half of 2008 (having grown very strongly during the preceding two years). Lifestyle buyers, formerly one of the twin engines of growth in the agricultural land market, appear to have succumbed to the downturn in the financial services sector and generally tighter credit conditions (which are restricting mortgage availability). However, the other engine of growth, the commercial farmer, largely remains intact, buoyed by record food prices in world markets. Indeed, the share of purchases by individual farmers and agricultural businesses jumped respectively from 50% to 56% and from 5% to 8%. This was offset by a fall in the share of non-farmers purchases from 37% to 27%.

As a result of booming commercial demand and only a modest pick up in supply, agricultural land prices gathered further momentum during H1 2008. The weighted average price of arable and pasture land increased to £12,965 per hectare, from £10,439, an increase of 24% h/h (47% y/y). Broken down by type, weighted average arable land prices increased to £14,453, an increase of 32% h/h (56% y/y). Weighted average pasture land prices increased to £11,477, an increase of 16% h/h (36% y/y).

Looking forward, there is a now a widespread perception amongst surveyors that growth in agricultural land prices likely reached a peak in H1 2008. Demand from lifestyle buyers will continue to be depressed by the more challenging environment facing both the economy and financial services sector. Meanwhile, in the commercial arena, one of the implications of record food and commodity prices in world markets is that input prices (in the form of animal feed and fuel) are also soaring. This is already turning some marginal farms unprofitable, resulting (as mentioned above) in a modest pick up in supply. Surveyors however, increasingly believe there is a real possibility of a further boost to supply as an increasing number of small commercial farms find themselves unable to shoulder such cost increases over the next year.

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Agricultural land and property Report 2008 for

England and Wales - General Overview

North West

North East

Yorkshire and the Humber