Fragmented land market sees values polarise

Farmland markets virtually flatlined in the third quarter of 2024 – reflecting high average values which remain steady, suggest the latest figures.

And with some distinct emerging trends, some areas of the country are commanding exceptional prices, according to the Knight Frank Farmland Index, which tracks the values of bare agricultural land in England and Wales.

“Across the board, land sales are still tracking higher than other property values such as central London residential and the wider housing market,” says Will Matthews, the land agent’s head of farms and estates.

“There’s no doubt the timing this year of a general election just before summer holidays and now a Budget followed by Christmas has made for a quiet market.”

‘Hugely polarised’

Mr Matthews says it is difficult to talk about the market as a whole because farmland prices are becoming hugely polarised – depending on their location, desirability and revenue potential.

“Every acre has its own microclimate,” he says.

What sells for £20,000/acre in some parts of the country could be worth much less in another. This is down to some emerging trends, including the growth of English wineries and a more organised market of environmental purchasers.

“When it comes to who is buying, we are starting to see more genuine activity from environmentally motivated purchasers,” says Knight Frank associate Alice Keith.

Ms Keith is an Environmental, Social, and Governance (ESG) ambassador –connecting landowners, farmers, institutions, funds, developers and businesses, assisting with the purchase and sale of land.

“Previously, there had been a lot of talk and interest, but relatively few successful bids,” she says. Now that has changed, making it important for vendors to identify the latent “green” value of their land.

Better funded

“Buyers with a conservation agenda, whether investment-led, charitable or driven by personal altruism, seem to be better funded and organised when it comes to bidding on suitable properties.”

Some 87% of respondents are farming in a more nature friendly way – but only 41% see biodiversity as a priority, according to a recent survey by Knight Frank for its annual state-of-the-nation Rural Report.

“All landowners should be capturing the value of the biodiversity and natural capital on their land to ensure that they are sufficiently rewarded when it comes to selling,” says Ms Keith.

“With Biodiversity Net Gain compulsory for new house building, and Labour plan-ning 1.5 million new homes, alongside a high ESG responsibility for corporates, natural capital will only drive up values.”

Emerging markets

Phosphate credits – needed by developers for building new homes – are another new area. They can be created – and sold – for example, from a change of use for pig or dairy units, planting trees or developing a watercress farm.

England’s dramatically growing viticulture is also influencing land prices. High value sales have been achieved as the changing climate and suitable soil make more locations suitable for growing vines.

Kent, Sussex and Surrey remain attractive places to establish vineyards for produc-ing sparkling wines. They are being joined by Essex, Suffolk and Cambridgeshire for producing still English wine.

The sector has grown 75% in the last five years to 10,000 acres under vine and 950 vineyards, split between both large commercial foreign wine houses, including Tattinger, and small-scale UK entrepreneurs or as a side project.

Large blocks of land unencumbered with houses are selling for strong prices, often to non-UK buyers. “I have had interest at almost £30,000/acre for a parcel of sever-al hundred acres in the south of England,” says Mr Matthews.

Different factors drive land values

Large estates are coming on to the market because it doesn’t make sense to split them between siblings, says Knight Frank.

Succession is affecting one in four respondents to the land agent’s Rural Sentiment Survey. Meanwhile, a new type of buyer is coming to the sector – attracted by inno-vation, technology and a greater emphasis on farming with nature.

Other factors that could impact land sales going forward will be the quest for more onshore renewable energy and infrastructure projects – including large-scale data banks, depending on location.

“It’s an interesting time ahead for farmland sales,” says Knight Frank’s Will Matthews. “We’re a small country and the pressure on land means values will remain high.”

It’s becoming harder to put a price on each acre, he says. “Competition is what drives the market, and we’ll be helping clients realise the green, business and social assets of their land to maximise its value.”