September 25, 2015

The price of good quality, ‘investment grade’ English farmland has doubled over the past five years on the back of high demand from pension funds and wealthy individuals, according to Knight Frank.

The price for an acre of ‘investment grade’ farmland in England has climbed to £12,500 per acre – an increase of 100% since 2010 – making the country have the most expensive farmland in the world and providing a higher return than luxury London homes, which saw an increase in price of 42% over the same period, or gold, which has dropped by 10%.

Comparing global farmland prices when converted to the same currency, some of the world’s best farmland in the Pampas of Argentina is selling for a third of the price of English farmland at £4,510 per acre, and  comparable farmland in Canada is selling for £800 per acre, in Brazil for £2,390 per acre, and in Australia for £830 per acre.

This increase in farmland values has happened concurrently with falling global commodity prices, especially for wheat. In December 2012, wheat prices peaked at £214 per ton when global demand for the grain was 679 million tons but global production only totaled 657 million tons. Since then, wheat prices have fallen by 50%, with current global demand equaling 715 million tons but production totaling 725 million tons.

“Comparing farmland prices with wheat prices highlights that the link between commodity prices and land prices has been tenuous to say the least over the past five years,” says Clive Hopkins, head of farms and estates at Knight Frank “This is not to say it doesn’t exist at all. If commodity prices stay low, this will eventually have an impact on land prices.”

Indeed, the effect of low commodity prices may already be evident as the rate of farmland value appreciation in England has slowed to the lowest rate in years in the third quarter of 2015, increasing only 0.5%, with the number of farms up for sale increasing by 20% over the past year. Historically, however, this number is still relatively low and insiders do not expect a significant effect to be seen on prices.