Farmland values have stabilised after a year of uncertainty, with the government’s inheritance tax U-turn helping to restore confidence in an otherwise subdued market.
The price of bare agricultural land remained virtually flat in the final quarter of 2025, leaving average values across England and Wales down by just over 5% over the year. An acre of farmland is now worth just under £8,700.
Not since the second quarter of 2017 have annual values fallen by more than 5%, a relatively limited decline given pressure on grain markets, residential property and agricultural policy.
Will Matthews, head of farms and estates at Knight Frank, said the market ended the year on a subdued note. “The market remained fairly stagnant at the end of 2025 in line with the rest of the year,” he said.
He added that while global economic and political uncertainty has driven gold prices to record highs, farmland has lost some of its traditional appeal as a safe-haven investment.
Over the past five years, agricultural land values have risen by 26%, outperforming prime central London residential property, which has fallen by 5%, and the wider UK housing market, up 19%.
Uncertainty has weighed on buyer appetite since Labour’s first budget in 2024, when plans were announced to overhaul inheritance tax for agricultural and commercial property.
With even relatively small farms set to become liable for inheritance tax from April 6, 2026, fears of forced sales weighed on demand, with successors potentially needing to sell land to meet tax bills.
Matthews said the slowdown reflected “the widely held perception that the current government sees greater taxes on the wealthy as a solution to its fiscal worries”.
He added that potential buyers, particularly from overseas, have been reluctant to commit to high-value purchases such as farmland.
The government’s partial U-turn just before Christmas has since eased some of those concerns. Under the revised proposals, only farms worth more than £2.5m will now be liable for inheritance tax, with the threshold doubled to £5m for married couples or those in civil partnerships.
While larger farms that fail to mitigate their exposure may still face significant liabilities, the changes are expected to protect a substantial part of the sector.
Matthews said sentiment may now have reached its lowest point. “I do sense, however, that confidence may have hit its nadir,” he said.
He added that the government’s change of direction showed “at least some understanding of the challenges facing rural property owners”. There are early signs that fewer farms will come to market in 2026 than previously expected.
The risk of a sharp rise in land sales has eased, supported by a further cut in the Bank of England base rate in December, which is expected to reduce borrowing costs.
Although challenges remain, many farmers are now expected to adopt a wait-and-see approach as 2026 unfolds. Agents expect supply to remain tight and average farmland values to stay broadly stable over the year ahead.
Matthews said deals continue to be agreed, but realism remains essential. “There is still plenty of wealth around and deals are still being done, often at levels well over £10,000/acre,” he said.
“Vendors need to set guide prices at realistic levels and be prepared to wait for the right buyer to come along.”
The Knight Frank Farmland Index has tracked the value of bare agricultural land since 1944.
