Edward Russell of Knight Frank’s Birmingham office says competition for farmland is high.

According to research by Knight Frank farmland in England rose in value by an average of 38% in the year to June 2008 with an increase of 10% alone in the second quarter of 2008. The average value of agricultural land is now £5,100 an acre up from £3,708 an acre a year ago.

The company’s rural land experts report that average land values in England grew by a further 10% in the second quarter of the year. Although growth had slowed slightly from the 12% recorded in the first three months of the year, farmland is still a much sought after commodity and our index, which tracks prices across England, has broken the £5,000 an acre barrier for the first time.

Edward Russell of Knight Frank’s Birmingham office has recently handled the sale of several farms in the Midlands comments: “Despite the credit crunch and massive increases in fertiliser and other agricultural input costs, farmers, lifestyle buyers and investors are still competing for an extremely limited supply of farmland. Blocks of farmland are still selling for well over £7,000 an acre and one of the interesting things about this market is that size seems more important than quality. Large parcels of land are so rare that even average quality land is fetching premium prices.”

The big question remains as to how long this trend can continue. Falling prices in the housing market and mounting worries about the economy in general has dampened enthusiasm of lifestyle buyers - who still account for 30% of the farmland market - and who are looking for a slice of the English countryside. Foreign buyers have been big farmland purchasers over the past few years, but Irish activity has slowed markedly this year and Danish farmers - another significant purchaser group - are also reportedly starting to view UK farmland as expensive.

Despite this, there are few signs that the amount of farmland for sale will increase dramatically and this limited supply means values will continue to rise - albeit at more modest levels. Knight Frank are predicting average land prices will increase by 14% over the next 12 months but larger blocks could outperform the overall farmland market.

* For any further information please contact Edward Russell at the Birmingham office on 0121 200 2220.