The UK has approximately 60 million acres of land in total and 70% (approximately) of this land is owned by 1% of the population. Until recently this land mass was owned by only 6,000 or so landowners, including large institutions and the Crown. However, there has been a recent shift in ownership of land as it becomes a more attractive asset to people other than traditional land owners. It is particularly attractive when it can be bought and sold in acreages suitable for the private investor who wants to buy land for long term speculation.

We know that there are lottery winners in this country but there are very few of us who have actually met one. Likewise for the farming community over the last decade or so; there was occasionally a story told at market of the odd lucky farmer who managed to sell a quaint slab of land to a rich city type who wanted to own a piece of the country. But today farmers know the winners personally – they are people who have actually sold land for what would have been considered barmy money less than 18 months ago. Neighbours and friends are currently making over £6000 per acre, and farmers are out with their measuring stick and ‘for sale’ signs, before their luck runs out.

Andrew Shirley, Head of Rural Land Research at Knight Frank confirms this growing trend: “The UK farmland market continues to shrug off the credit crunch affecting other property classes, but continues to grow in value at a phenomenal rate. The average price of farmland has already risen 12% this year – the largest quarterly increase on record.”

It has to be said that farmers have had their share of bad luck over the last ten years: BSE, foot & mouth, blue tongue and bird flu – the list goes on. Which is why they are currently pinching themselves - is it all a dream? Are they really being paid £150 per ton for wheat? Are they really being paid rent of at least £240 per acre for land suitable for market gardening and growing potatoes? A Staffordshire farmer recently pointed out that trying to buy a new £80K tractor is suddenly impossible, not because of the lack of funds, but because there is a waiting list almost as long as the one for the Bugatti Veyron, and judging by the smile on his face he’s probably on the list for one of those as well….

According to the Royal Institution of Chartered Surveyors, the value of farmland rose by 28 per cent during the second half of 2007. The last time agricultural property prices increased at such a rate was during the late 1970’s when annual increases of 40 per cent were common place.

The trendy city type - or ‘lifestyle farmer’ - is snapping up arable land as food prices increase and they look to make a fast buck from new markets which are growing faster than the crops are planted. However, these still only make up 29% of the market, and they face stiff competition from the agricultural community. Another fast growing buyer is the Irish and Scandinavian farmer who is looking for land which at current prices is much cheaper than in their own countries.

So apart from shortages in rice, wheat and the fixed nature of supply of land, what has changed in the last 18 months, or more specifically, the last 6 months?

Well, principally the city has cocked up. In dreaming up increasingly complex and exciting ways of making money, the risks have become evermore disproportionate - to the point of creating last July’s sub prime crisis and subsequent credit crunch. Investors are removing their money from stocks and shares into what they consider to be a more solid financial risk. This has lead to unstable financial conditions which could include a reduction in consumer spend, unpredictable currency fluctuations and an unsteady property market.

To steal a line from Alex, the cartoon in the Daily Telegraph (Mon 21st April 2008), investors want “plain vanilla” investment. They want to go back to basics, to something they understand. This is why gold broke the $1000 per ounce barrier earlier this year and why farm land is achieving ‘Gold Top value’ for arable and dairy farms alike. The simple fact is that no matter how much consumers pull in their horns, they still have to eat, and you don’t get much better than good old-fashioned English ‘bread and butter’.

source: Anna Donaldson

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