The secret commercial property boom

Martin Keene/PA Wire

A new survey has revealed a surprise surge in demand for commercial farmland.

The RICS Rural Land Market Survey, showed prices reaching record levels during the second half of last year.
The report shows a marked increase in prices from an average of £5,846 per acre in the latter half of 2010, to £6,514 during the second half of last year, and farmland has now almost doubled in value in the last five years.

According to chartered surveyors, all areas of Great Britain experienced rising farmland prices during the final six months of 2011, with the exception of the North East and Scotland. Significantly, farmland in the West Midlands saw the strongest increase in price.

Why the big increase?

The report shows a growing disconnect between the flagging residential farmland sector and the booming commercial arena - 53 per cent of chartered surveyors reported an increase in demand for commercial land over the previous twelve months, while demand for residential farmland remained flat at -4 per cent.

So just why is the commercial side so dramatically on the up?
RICS sites a growing interest from commercial farmers looking to expand their enterprises and their production in order to capitalise on the strength in commodity prices. There is also evidence that banks are beginning to lend more to the agricultural sector; supporting farmers plans for expansion.

Will the boom continue?

The report showed a significant imbalance between supply to the market and demand from potential buyers, as land availability dropped off in the final six months of 2011.
Given the imbalance between supply and demand, surveyors predict strong growth in the commercial farmland market to persist and the recent trend in farmland prices to continue over the coming twelve months.

Sue Steer, RICS spokesperson, commented: "Land prices reached record levels once again towards the end of 2011, as commercial farmers looked to capitalise on increasing commodity prices by expanding their businesses.

"With demand continuing to surge ahead and a seemingly low level of land coming onto the market, it is easy to see why prices continued to rise so sharply across most of the country.
"Furthermore, it would seem that this trend is set to continue over the next twelve months. However, the outlook is slightly more mixed for farmland which is more geared towards the residential sector, reflecting the broader national housing picture."
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