English farmland values fell by just 1.7% in the second quarter of 2016, compared with a slide of 3% during the first three months of the year, according to new figures.
The average value of English farmland is now £7,773/acre.
While this is 6% lower than the record-high of £8,306/acre hit last September, it still represents an increase of almost 160% over the past 10 years.
This compares strongly with other asset classes.
The top end of the residential market in central London, for example, has increased by 98% over the same period, although a post-Brexit scramble for safe-haven assets has seen gold’s 10-year return hit almost 200%.
Majority of farmers backed Brexit
Given that agriculture is the biggest recipient of EU funds via the Common Agricultural Policy (CAP) – many UK farming businesses rely on farm subsidies to break even – it might have been expected that the Brexit vote would have had a bigger effect on prices.
However, there are a number of reasons why this hasn’t happened.
According to polls, a majority of farmers backed Brexit so the sector will not be unduly pessimistic following the referendum.
The slide in sterling has also had an immediate upward effect on wheat prices and will help livestock exports.
Sterling’s loss also makes UK farmland better value for overseas investors – we have already received a number of enquiries from a wide-ranging geographic spread of potential buyers attracted by this currency boost and also farmland’s safe-haven status.
A new round of potential quantitative easing currently being mooted by a number of central banks could accentuate this trend.
Prices should remain steady for the rest of the year, but looking further forward it is harder to judge where they will head.
Much will depend on the outcome of the UK’s trade negotiations with the EU and the rest of the world, as well as how the government decides to replace the CAP.
"If any of these changes render some farming businesses unsustainable we will likely see more land come to the market," the Knight Frank report said.
"This could put downwards pressure on values, but it will also present opportunities for entrepreneurial businesses and investors, and demand should remain firm."
