South East: Land market bucks trend as commercial demand remains steady, says RICS

The latest survey by the Royal Institution of Chartered Surveyors (RICS) and Royal Agricultural University (RAU) indicates that, across the UK as a whole, rural land prices are falling along with demand, but the South East is an exception to this trend. Indeed, arable land prices in the region actually increased slightly while prices for pasture land held steady. 

Going forward, respondents to the RICS/RAU Rural Land Market Survey H2 2015 are projecting an increase in prices for rural land blocks with a residential component in the South East over the next 12 months, with 33% more rural chartered surveyors expecting to see the price of such farmland rise (rather than fall).

These upbeat expectations have been driven by continued demand growth in the region, even though buyer interest has declined on a UK-wide basis.      

However, demand for commercial (non-residential) farmland in the South East flattened off during the second half of 2015 and, as a result, prices are anticipated to remain broadly unchanged over the year ahead.

This stands in contrast to the national picture, where 31% more respondents reported a decline in demand for commercial land over the past six months. This drop-off in demand is feeding through into negative price expectations; with 34% more respondents expecting to see prices for commercial land fall (rather than rise) over the coming 12 months.

While 50% of South East rural land sales were made to individual farmers over the past six months, non-farmers – such as those starting up cottage industries – accounted for 32% of rural land sales. This is the highest proportion of non-farmer buyers in the UK with the national average being 25%.  

Meanwhile, both arable and pasture land rents registered an increase over the second half of 2015.

RICS chief economist Simon Rubinsohn said: “While rural land prices have risen over recent years, the global fall in crop prices is likely to cause prices to stall over the next 12 months. The South East is one of the few areas that has not yet seen prices fall albeit demand and prices expectations for commercial land flattened.   

“As commercial and residential property prices in our towns and cities are continuing to rise rural land is likely to become increasingly attractive to those outside traditional farming communities. Already, across the UK a quarter of all countryside land is being purchased by non-farmers – lifestyle buyers or hobby farmers – and this trend is highest in the South East.”