The average price of bare agricultural land in England and Wales hit a new all-time high of £9,250 per acre in the first quarter of 2024.
Farmland values saw a 1% rise over the previous quarter, taking the annual rate of price growth to 6%, the latest figures by property consultancy Knight Frank show.
Farmland values outperformed other major asset classes over the 12-month period, including the FTSE 100 (+4%), UK house prices (+1%) and prime central London residential properties (-2%).
"The farmland market has remained remarkably resilient amid economic headwinds," explained Andrew Shirley, head of rural research at Knight Frank.
"Our research highlights that low supply volumes combined with strong demand from a wide range of buyers, including those looking to participate in environmental schemes are supporting prices."
The firm's Farmland Index Q1 2024 report reveals a number of drivers helping to support farmland values in the first quarter.
These include increased government funding for environmental land management programmes.
Continued buying activity from those with rollover tax liabilities to mitigate is also applying upward pressure on prices.
Supply remained constrained in Q1, with limited publicly marketed land for sale, Knight Frank explains.
Additionally, the recent HMRC announcement that land enrolled in environmental schemes does in fact still qualify for Agricultural Property Relief on inheritance tax, has provided reassurance among landowners.
Mr Shirley added “Recent clarity from the government has certainly added some confidence. However, the market remains a little uncertain."
The loss of the Basic Payment Scheme may now be starting to bite, which could boost supply, he said.
"Additionally, the anticipation of a general election may slow down market activity, as both vendors and buyers adopt a 'wait-and-see' approach until there is more clarity."
Looking ahead, Knight Frank points out that the phasing out of EU farm subsidies and generally lower commodity prices could weigh on the market. However, the fundamental supply demand imbalance is expected to keep prices within a narrow range.
Will Matthews, head of farms at Knight Frank, said that despite short-term challenges like subsidy reforms and fluctuating commodity prices, the underlying fundamentals driving demand for agricultural land remained very favourable.
"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," he said.
"We anticipate ongoing investor interest in 2024, especially from those seeking to participate in biodiversity and climate initiatives on their land.”
The Knight Frank Farmland Index has tracked the value of commercial agricultural land since 1944.
