— Knight Frank, 04 January 2022
The farmland market ended 2021 in an upbeat mood, according to the latest results from the Knight Frank Farmland Index.
A 4% rise in the average value of land during the final quarter of the year saw land prices rise by 10% over the year – the strongest annual rate of growth since 2014.
Over the past 12 months, farmland has also outperformed gold (-2%) and our Prime Central London Residential Index (+1%), highlighting its resilience during periods of economic turbulence and enhancing its reputation as a hedge against inflation.
2021 saw the balance of supply and demand become abnormally skewed. At little more than 64,000 acres, the amount of land advertised publicly, according to the Farmers Weekly Landtracker, was similar to the record low registered in 2020 when the Covid-19 pandemic decimated the market.
Demand remained exceptionally strong throughout the year as buyers with a range of motivations battled for the few good holdings that did reach the market, often setting values significantly higher than our index.
Buyers looking to farm regeneratively, plant trees to harvest carbon, or even rewild have been particularly strong players. This environmental focus has pushed up prices for land that would have been considered agriculturally less productive just a few years ago.
It seems unlikely that we will see a huge surge in the availability of farmland for sale next year, and with demand predicted to remain firm land values should continue to climb.