The booming farmland market was finally stopped in its tracks during the third quarter of 2008, according to a report from Knight Frank.
Values declined over the quarter by -1 per cent, a stark contrast to the rises of 11.9 per cent in Q1 and 10.4 per cent in Q2.
As a result, annual growth slipped to 27 per cent from a peak of 38 per cent recorded in the previous quarter.
Nevertheless, the average price of agricultural land is £5,060 per acre, considerably higher than the £3,997 per acre average from a year ago.
Difficult Conditions
Knight Frank attributes the fall to a loss of confidence in the market as farmers contend with declining commodity prices, increased output costs and the results of a wet harvest.
The harvesting conditions have particularly affected arable farmers, who have suffered declines in the price of feed wheat, in addition to facing higher input costs from rises in the price of fertiliser and other products.
The market has also been affected by lifestyle buyers, as many of those who funded farmhouse purchases were reliant on big city bonuses and a thriving financial sector.
Without these buyers biting due to the current economic conditions, Knight Frank notes that activity has declined substantially.
Small Decline Ahead
But despite a somewhat gloomier quarter for the farmland market, Knight Frank believes that it is better placed to hold up than the wider market, thanks in some part to a lack of supply.
Andrew Shirley, head of rural land research at Knight Frank, comments: "We are only forecasting a small decline in average values over the next 12 months of between two per cent and five per cent, although this may be greater for smaller, purely commercial blocks of bare land with limited neighbour interest.
"There is still a relatively limited supply of land, which should help ensure farmland prices do not slide as dramatically as the residential market.
"A number of frustrated buyers, particularly funds, may also see this cooling-off period as an opportunity to get into a market that has previously been too hot for them.
"Unless we see a massive flood of land for sale during the rest of the year and into 2009, and there are no signs of this happening despite a modest upturn in the number of farms for sale, the market should remain firm and the best properties will still sell well."
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