Farm land price boom

The cost of agricultural holdings across the EU has risen to record levels. However, this is not entirely good news for farmers. It makes it even harder for those who do not inherit to enter the industry, while only farmers wanting to retire can cash in. Tenant farmers face higher prices making life more difficult for them.

Several funds have been set up to buy farmland, particularly in the UK where prices have risen 40 per cent over the last year. Manchester-based group Braemar had to close a fund it launched after two weeks. Higher commodity prices have also attracted institutional investors such as Blackrock and Schroeder.

Good quality arable land in the UK is fetching £6,000-£8,500 an acre in many parts of the country. Buyers from Denmark and Ireland have been piling into the UK for several years. Some estimates suggest that as many as 30 to 40 per cent of buyers in the eastern countries of England are coming from overseas.

Land prices fell between 1997 and 2003 in the UK after the BSE and foot and mouth crises. The price could rise to £8,000 – £10,000 an acre, close to the price in parts of Denmark, but industry experts predict that it will rise more slowly from now. One factor who has been ‘lifestyle buyers’ who run farms as hobbies rather than businesses, while field sports are a factor in purchases within reach of London.

There are considerable variations in land prices across the EU. In Lithuania a hectare of agricultural land cost €734 in 2006 compared with €164,340 in Luxembourg, the most expensive country. In Poland the average price rose 60 per cent between 2003 and 2006. Foreigners cannot buy land in Poland until 2016 but it is easy for investors to set up a local company to bypass the rules.

In France land is about €6,000 a hectare because it must be offered first to young local farmers. However, land prices are still 50 per cent up on 2003.

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