Rural land prices could fall according to latest land market survey

Published February 9th, 2016

Increasing urban property prices and falling land values could be fuelling a rise in new rural business start-ups, the latest survey by the Royal Institution of Chartered Surveyors (RICS) and Royal Agricultural University (RAU) indicates.

Non-farmers, such as those starting-up cottage industries, accounted for around 25% of rural land sales over the past six months. This figure was up from just 18% in the first half of 2015, according to the RICS/RAU Rural Land Market Survey H2 2015 and the trend was strongest in South East England where non-farmers accounted for 32% of all sales.

By contrast, property developers accounted for only 1% of rural land sales over the same period, a decrease of 2%. While sales to individual farmers fell from 62% to 57%.

Meanwhile, survey respondents have this year predicted that land prices will fall over the next 12 months, with 34% more rural Chartered Surveyors expecting to see prices drop than rise.

RICS Chief Economist, Simon Rubinsohn said:

“While rural land prices have risen over recent years, the global fall in crop prices is likely to cause prices to drop over the next 12 months.

“Added to that, commercial and residential property prices in our towns and cities are continuing to rise. This is likely to make rural land increasingly attractive to those outside traditional farming communities. Already, a quarter of all countryside land is being purchased by non-farmers – lifestyle buyers or hobby farmers – throw all these factors into the mix and this trend is set to rise.”

RICS Head of Policy, Jeremy Blackburn said: “Start-up businesses do not have to be confined to the trendy streets of East London, Britain’s countryside has a great deal to offer young entrepreneurs. Market conditions appear to be encouraging a wave of new types of rural business, and help must be given to support this trend further if our countryside communities are to thrive.

“New entrants to farming businesses continue to face barriers, but at RICS we are currently working with the Fresh Start Land Enterprise Centre (FSLEC) who are developing a pilot ‘matching service’ for potential land entrepreneurs, helping to bring together those looking for new opportunities in agriculture with those who have land and rural real estate to let.”

FSLEC is running workshops up and down the country for those interested in launching new rural businesses:

Across all farming sectors, demand for rural land is expected to fall over the next twelve months. While in the last half of 2015, the only areas where demand for land grew were the North East and South East of England.

Land yields remained relatively stable over the second half of the year at 1.8%, from 1.7% previously, while arable and pasture land rents fell by 4.5% and 4% respectively over the course of the year.

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