Have East Anglian land prices peaked?

Saturday, February 25, 2012
11:09 AM

History shows that the soaring value of farmland could soon be reaching a peak at the end of the current recession, according to Nicholas Durrant, chairman of Durrants.

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An analysis over the past 30 years showed that when a recession in the general economy ended farmland values tended to fall, he told almost 100 farmers at a Halesworth meeting organised by Lovewell Blake and the NFU.

“Farmland values are counter-cyclical with the general economy – that’s a trend we’ve seen consistently through the past three recessions,” said Mr Durrant.

“With the current recession likely to end within the next two years, this might well have an adverse effect on land values.”

He compared farmland values with that of a semi-detached cottage whose value moved in sympathy with the wider economy. In 1982 when land was valued at £2,000 an acre, it took 10 acres to purchase such a property.

With the rise in property prices in the 1980s this ratio increased to 27:1 by 1989 when land values averaged £1,800/acre. During recession in the early 1990s land prices more than doubled, restoring the ratio to 10:1.

The escalation in property prices in the 10 years to 2006 coupled with poor farming returns meant that you would need to sell 46 acres to purchase a £140,000 cottage, he said.

Then with the rapid increase in wheat prices since and declining property values – and farmland averaging £8,000/acre – it would now require only 16 acres to buy the same cottage.