Why has the price of farmland doubled?

The Independent recently ran a piece looking at how agricultural land has skyrocketed:

Are lifestyle farmers really to blame for the soaring cost of agricultural land?

The term 'lifestyle farmer' refers to people who swap an urban existence for rural life, as Oscar Quine reports

Saturday 14 November 2015

Since 2010, good-quality farmland has doubled in value to £12,500 an acre. That's an even steeper rise than that in prime London property over the same period (42 per cent) and represents a better return on investment than from both the FTSE 100 or gold.

Are lifestyle farmers really to blame for the soaring cost of agricultural land? | Home News | News | The Independent

It's a story the WMN has been covering for some time:

Soaring price of farming land in South West

February 18, 2013

Farmland prices in the South West have reached a record high driven by increased demand and lack of available land.

The National Farmers' Union in the region said there were positives and negatives for the industry. "It is a double-edged sword," South West spokesman David George said. "For any farmer who is lucky enough to own their own land it is an asset which is increasing in value, which can be borrowed against to help their financial position. On the other hand it makes it very difficult for those entering the profession to get their foot on the ladder. For tenant farmers, rents are partly based on the value of land which could make things more difficult during rent negotiations."

Soaring price of farming land in South West | Western Morning News

It does seem that UK farm land has become a desirable commodity over the last year and a half:
Farmland prices rise sharply as investor demand grows - FT.com
British farmland prices rising faster than prime London property - Telegraph
English farmland cost trebles in 10 years outperforming the FTSE 100 index | This is Money
Farming News - Investors target English farmland as prices double in five years

But as the WMN said earlier this year, it's also a matter of 'development':

Farmland for sale doubles rise as investors cash in on price rises

July 13, 2015

“We are hearing of many landowners with development money in the pipeline and they could be a major driver of the market over the next couple of years. We suspect development decisions were put on hold around the time of the election and we now have many people coming to us to register as they are due to come into funds within the next 12 to 24 months.”

Farmland for sale doubles rise as investors cash in on price rises | Western Morning News

A land agent writing in the WMN made a similar point:

Turning farmland into building land

April 01, 2015

These five acres of grassland for sale in Kelly Bray, near Callington has the right qualities for development, says Hugh Townsend

Comments (1)

With national demand for housing showing no sign of slowing, the need for land on which to build remains strong.

Reports of agricultural land being sold to developers for as much as £1m an acre might make any landowner think about whether they can lose a few acres of farmland, freeing up cash for reinvesting in other areas. Clearly the first thing that makes agricultural land a potential development site is its location; most farmland is considered too remote to be suitable for building new houses on. It is for this reason that unused barns can be such boons for landowners who are looking to benefit from the high demand for housing.

But anyone who has noticed a rash of new developments go up in their area will probably know already that all local authorities are required to meet targets for home-building, and must allocate areas suitable for development. If they fail to do so, a developer with a good legal team can argue that their proposed new housing estate is “sustainable development”, and get approval.

But even with the financial and legal backing of a big company behind them, developments do need to meet some very strict criteria. Being located close to local amenities such as shops, hospitals and public transport links is a key consideration and adds considerably to the chances of getting planning approval. The fact that such “greenfield” land is relatively scarce increases its value, and even land that is not currently earmarked for development in a Local Plan can be uplifted by having “hope value” – somewhere likely to be considered for future development.

Looking at an example, Townsend Chartered Surveyors are inviting informal tenders for five acres of grassland near Callington with stunning far-reaching views towards Bodmin Moor by May 22. The land is located to the North of Callington on the west side of the A388 on the Launceston Road towards Kelly Bray. It has many qualities that planners are looking for when assessing sites for development. Served by local bus routes, located close to shops, schools and health facilities, this therefore would be suitable for “sustainable development”. Cornwall’s Local Plan has set a requirement for 47,500 new homes; 1,000 of these are earmarked for the area in and around Callington and 504 of these have not been not been allocated.

These five acres of Grade 4 grassland, located close to a town but with established farming usage, including access to mains water and a spring-fed field trough, represent a good short-term opportunity, but with an additional long-term “hope value” due to its location close to an area which is due to expand further before 2030. Tenders are invited either with no overage agreement with a guide up to £200,000, or with an overage of 33% for thirty years with a guide of over £75,000.

A landowner who sees an increase in the value of their land due to buying agricultural land and then selling it as development land will need to consider first the implications of Capital Gains Tax, and how best to mitigate against this. Reinvesting the proceeds of a sale in business assets such as more farmland and machinery means that the Capital Gain can be “rolled over” until the disposal of the assets bought with the sale proceeds.

Hugh Townsend of Townsend Chartered Surveyors, talks of the national demand for housing and the potential of agricultural land in the South West as development sites | Western Morning News

A letter in last month's WMN has a different perspective:

Stop wasting farm land

October 15, 2015

The debate about the sell-off of social housing, like the debate about house-building, seems always to omit the most crucial factor.

The popular equation balances people, houses and money to try and find a solution to the need, in the Northern hemisphere, to shelter everybody. It doesn’t take Einstein to realise that something’s missing!

The factor which is missing is land. It is important because, even the most prosperous (or indebted!) of second/third/fourth home owners will gain no enjoyment in value if there is nothing in the larder and nothing on the tap to eat or drink. No amount of pluralist votes in any number of elections will help. How much land do we need for food, energy, fuel, or for woodland, medicine or for its own sake? Surely, in planning our use of land, we should be balancing and managing this most finite of resources.

If we consume too much land by building houses to replace those with which we over-feed the investment industry, the visitor trade and town centre office demand, and add to this the town centre obsession with only using the ground floor, leaving hundreds, if not thousands (in Cornwall alone) of perfectly good dwellings in semi-dereliction ‘over the shop’, then the outcome is inevitable – we will clutch parched throats and aching bellies under luxurious roofs and will fight each other for scraps.

The imminent sell-off of housing association stock, built with public money to meet the needs of those increasingly excluded from the wasteful housing so-called ‘market’, and the blithe assurance that it’ll be all right because we will build more and more, rings hollow.

In a society which has institutionalised the food bank, which is held to annual ransom by a private sector water company remains obscurely unaccountable to those whose resources it controls, and where we pay subsidies to increasing numbers who can’t afford payments on homes which their owners (landlords or banks) have to levy in turn, to meet the costs of the loans which enable them to own, build and ‘profit’, we are risking both peace and financial credibility!

Planning’ applications over the past generation no longer concern ‘brown’ land, or occasional fields – they now consume farms, and are beginning to consume clusters of farms. The erstwhile Truro Area Local Plan postulated the removal over 15 years of 17 farms from within a 12-mile radius of this town – that is, a town put there to serve the concentrated area of high quality farmland. The whole thing is driven by a system obsessed with servicing a bureaucratic invention dubbed ‘the five year land supply’ – as if land is manufactured somewhere up a Norwegian fjord!

With the Cornwall Local Plan in the offing, and with globalism, climate change, austerity, population growth and ageing now directly affecting the resilience of our society is it time to re-focus the planning system, the assumptions of the ‘market’, and the husbandry of public resources. Selling housing association homes is as stupid a form of anti-social behaviour as is flogging council houses or spitting in the street!

WMN Letters: Stop wasting farm land | Western Morning News
.
.
.