UK farmland prices surged at the fastest pace in the RICS’ rural market survey’s history during the first half of 2008 but lifestyle buyers retreated as the credit crunch deepened.

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The farmland market jumped forward, with the average price rising by 24 percent (the fastest pace in the survey’s history) from £10,439 to £12,965 in the first half of 2008 and by 47 percent year on year. Arable land rose by 32 percent to £14,453 from £10,439 and pasture land rose by 16 percent to £11477 from £9929. Sharp increases in commodity prices continue to encourage farm investors to expand production or enter the market as purchasers.

The net balance of Chartered Surveyors reporting an increase in demand for residential farmland fell for the first time since 2005 from 50 percent to -3 percent while demand for non-residential farmland remained buoyant at 65 percent. The net balance of surveyors expecting price rises in residential farmland fell from 30 percent to -25 percent. There is an expectation that lifestyle buyers will continue to retreat while the challenging financial climate persists.

The number of farmland sales surged by 50 percent year on year and farmland availability picked up by in both the residential and non-residential sectors. Sharp rising costs in food and commodity prices have pushed input prices upwards resulting in marginal farms becoming unprofitable.

RICS spokesperson, Julian Sayers said:

“Ever rising commodity prices have pushed the price of farmland to record highs as farmers and investors compete for arable land. However, the days of the lifestyle buyer are on the wane. The credit crunch is putting an end to city expansion into the country as the precarious financial situation has made city slickers re-think their lifestyle priorities.”

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