The housing market may be in the doldrums but the price of farmland in the West Midlands hit an all-time high during the first half of 2011.
Chartered surveyors in the region estimate that the average price per acre increased to £6,375 during the first half of the year, reaching record levels for the second consecutive period.
The increase has been driven by higher commodity prices and farmers’ desire to beef up production to make the most of current conditions.
Land availability can’t keep up with growing demand as high commodity prices drive farmers’ plans for expansion, according to the RICS Rural Land Market Survey.
Nick Barlow of chartered surveyors Barlow Associates, near Coventry, said: “The demand for arable land is being driven by good commodity prices.
“Despite the drought, yields of winter sown cereals and oil seed rape are surprisingly good with internal demand in the UK and abroad being maintained at good levels.
“The high commodity prices and relatively low interest rates are helping predominantly arable farmers who wish to expand.
“Smaller parcels of pasture land remain in healthy demand, although prices have risen less than on arable land.”
According to the survey, interest from potential buyers in the region for commercial farmland continued to surge ahead, with 74 per cent more respondents reporting increases rather than decreases in demand.
Alongside rising demand, land availability increased for the first time in three years with 26 per cent more respondents reporting rises rather than falls in commercial farmland coming onto the market.
However although positive, the increase in the availability of commercial farmland was not enough to keep pace with the growing level of demand for it.
Given the imbalance between supply to the market and demand, surveyors across the West Midlands are predicting that the recent trend in farmland prices to continue over the next 12 months, with strong growth expected in the commercial farmland market.
Feeding into the research, one surveyor in Staffordshire said: “The rural property market remains strong.
“Values of farm units and bare land appear to be rising with increased interest from farmers.”
Another, based in Worcester, added: “There has been a slight increase in land to the market off the back of high prices reported in last year’s H2 survey and the continued strength of the commodities market, with farmers looking to expand production.
“Farms and land with a strong residential element have not been as high in demand compared to bare land, but overall supply remains tight when compared to demand.”