17 February 2017

Farmland prices remain strong despite global downturn

Savills’ Global Farmland Index recorded an average annualised growth of 13 per cent since 2002 and 7.5 per cent over the past 10 years. Ian Bailey, Savills head of agricultural research, said: “While pressure on commodity prices is the common theme across the global downturn in values over the past five years, these have shown less volatility than other commodities, being significantly less affected by the global financial crisis in 2008. Increased food production and competitive land use continue to drive demand for this asset, securing its status as an attractive longer term investment.”

Pressure in the short term

In the UK, Mr Bailey said the average value of farmland was likely to remain under pressure in the short-term due to low commodity prices, despite the fall in output costs and increased subsidy receipts due to the weak value of sterling. “The price pressure will be tempered by a continued low supply, which will help underpin prices in the medium to long-term,” he said “Additionally, we expect increasing rollover and general economic improvement in the medium-term to support demand and therefore prices.” Mr Bailey said he expected average UK values to increase by 5.5 per cent over the next five years, although he predicted local variations and a widening price gap between the best and poorest land.

Highlights from Savills’ Global Farmland Index

Highlights from Savills’ Global Farmland Index
  • Denmark
    Danish values are about 60 per cent of the equivalent quality farmland in prime German markets. Savills said a range of factors, including a number of sales forced by debts, meant Danish farmland prices had lost their place as some of the most expensive in Europe.
  • Romania
    The Romanian farmland market is maturing rapidly as many West European and Scandinavian investors continue to see potential driven by current values. Savills said prices were ‘reasonable’ compared to the mature markets in Western Europe including the UK. Top quality arable land values range from €5,000-€7,500 per hectare (£4,240-£6,360/ha – or £1,715-£2,570/acre).