'Lifestyle' demand pushes up farmland prices

Farmland prices have increased by 12 per cent over the past year due to a revival in 'lifestyle' demand from investors.

Demand has consistently stripped the supply of farmland throughout the year and prices were further exacerbated by the Co-operative Group's £249m sale of its agricultural arm earlier this year, which is made up of 40,000 acres of land.

Kent based law firm, Brachers, has been advising clients whose farms have experienced growth values of up to 25 per cent in some cases.

Simon Palmer, head of the agricultural team at Brachers, commented: "Demand is simply exceeding supply, which has been pushing up prices. The nature of the agricultural market is making it more necessary for farm owners to increase the size of their estate - for example, one family may need at least 1,000 acres to ensure an arable farm remains competitive.

"Choices for farm owners looking to expand are limited, as many will look to buy available land off adjoining properties - and this can certainly push up prices. These deals will also often be agreed in private which can exacerbate the problem of a limited supply."

Palmer added that some land owners are choosing to cut up their land and sell it in smaller pots, as this can increase the overall income they receive from the sale.

As well as the demand for a farmland lifestyle pushing up prices, the desire of many investors to install clean energy appliances on their land has also pushed up prices.

"What we have seen recently is the proliferation of the development of alternative energy schemes on farm, such as solar panels. The government estimates there are already approximately 250 solar farms within the UK and have ambitious plans for this figure to increase to over 1,000 by the end of this decade," he added.

Binyamin Ali is assistant editor of Private Client Adviser