Despite the turbulent year, the latest results from the Knight Frank Farmland Index, which tracks the value of bare agricultural land in England and Wales, shows there’s plenty of active buyers in the farmland market.
Overall, the farmland market edged up in 2024, with the index showing average values at the start of 2024 at £9,152/acre vs £9,164/acre 12 months later – representing a small increase of 0.1%.
“The knee-jerk reaction in the wake of the Autumn Budget was to worry that farmland values would slide significantly, but so far and given the time of year, when sales are notoriously slower, there have been too few transactions to back that theory up,” said Alice Keith, farms & estates expert at Knight Frank.
“While the changes to Inheritance Tax are, of course, extremely unwelcome and ill-considered, with careful succession planning it will be possible for many farmers and landowners to mitigate them. We don’t foresee that the changes will deter any significant proportion of potential buyers nor see an immediate impact on the current supply-and-demand dynamics of the farmland market.
“We are not seeing any signs of a significant rise in land coming to the market in 2025. Without that kind of surge, I don’t expect to see land values weaken radically over the next 12 months.”
Over the last year, the farming sector has faced a raft of big challenges – from severe weather conditions to delayed grant schemes, rapid reduction of the Basic Payment Scheme, and changes to the Inheritance Tax. To come out of the year with an overall rise in values shows the inherent resilience of agricultural land as a secure, low risk multi-functional asset class.
“Its performance as an asset – outpacing gold, equities, and residential property in recent years – underscores its security and growth potential,” continued Keith.
“Furthermore, prospects for marginal areas that were previously thought to be unproductive, are being driven by the environmental potential for land.”
Keith advised that various opportunities exist in the “net-zero era” for uplift in value and income potential for marginal land which may be unsuitable for commercial agriculture.
“Funding from the public and private sectors will support a number of alternative uses for biodiversity, carbon offsetting, renewable energy, and tree planting.”
These factors will continue to make farmland attractive to a range of buyers, including environmental NGOs, private investors and funds, as demonstrated in the recent sale of the Rothbury Estate in Northumberland to The Royal Society of Wildlife Trusts.
This estate encompasses 9,486 acres of grassland, moorland, and woodland, along with a portfolio of farms and cottages, including sites of special scientific interest.
“Throughout a considered sales campaign of the Rothbury Estate, we received extensive interest in this exceptionally rare opportunity from our network of environmentally conscious prospective buyers,” explained Claire Whitfield, partner at Knight Frank. “This highlights the appeal of beautiful, nature-rich environments like these to a wider range of purchasers than we may previously have observed.”
“Post-Brexit and with net-zero agendas, the farming industry in the UK is certainly at a crossroads. While this is bringing challenges, there are multiple options for those looking to use their land to generate new and more diverse income streams,” added Keith.
But NFU president Tom Bradshaw is less optimistic for the future of farming: “While the Knight Frank’s Farmland Index does show a marginal increase in farmland values over the past year, suggesting stability in the market and demonstrating the disconnect between demand for land and the returns from that asset, it’s clear that the limited number of transactions makes it difficult to draw firm conclusions about any longer-term trends.”
Bradshaw added that whilst the new deal laid out by government last week is a good move, many farmers won’t last long enough to reap the rewards.
“Ongoing uncertainty around government policies, including inheritance tax changes, remains a significant concern for our members,” he concluded.
