English and Welsh Farmland Values Reach Record High, Driven by Environmental Focus

The average price of bare agricultural land in England and Wales soared to an unprecedented £9,250 per acre in the first quarter of 2024, according to the latest Knight Frank Farmland Index. This represents a 1% increase over the previous quarter and a 6% annual growth rate, surpassing even major asset classes like the FTSE 100.

“The farmland market has remained remarkably resilient amid economic headwinds,” said Andrew Shirley, head of rural research at Knight Frank. “Low supply volumes combined with strong demand from a wide range of buyers, including those looking to participate in environmental schemes are supporting prices.”

Key factors driving farmland values include:

• Increased Funding for Environmental Programs: Heightened government support boosts interest in farmland for environmental initiatives.
• Tax Mitigation: Rollover tax liabilities continue to motivate purchases.
• Limited Supply: Publicly available land remains scarce, adding to price pressure.
• Inheritance Tax Relief: HMRC’s recent clarification on Agricultural Property Relief offers landowners reassurance.

However, uncertainty persists as the Basic Payment Scheme’s phase-out could increase land supply and a potential general election might slow market activity.

Looking ahead, Knight Frank anticipates that reduced EU subsidies and fluctuating commodity prices might affect the market. Despite this, the fundamental imbalance between supply and demand is expected to maintain prices within a stable range.

Will Matthews, head of farms at Knight Frank, emphasizes that despite short-term challenges, the core drivers of farmland demand remain strong. “With limited supply, farmland continues to be an attractive asset class that can provide a hedge against inflation and exposure to the growing environmental marketplace. We anticipate ongoing investor interest in 2024, especially from those seeking to participate in biodiversity and climate initiatives on their land.”