Demand for rural retreats from lifestyle property buyers in the UK is likely to remain depressed despite prices falling, according to a new report.
Prices and sales volumes for residential farmland are continuing to fall, says the Royal Institute of Chartered Surveyors Rural Market but commerical farmland is faring better with buyers in this sector returning to the market.
The net balance of chartered surveyors reporting a decrease in demand for residential farmland remained in negative territory for the first half of this year, with 30% more surveyors reporting a fall than a rise.
‘While the economic climate remains so uncertain, it is improbable that we will see demand for rural retreats return to pre-recession levels. As a result, residential land prices look likely to remain depressed for some time to come,’ said RICS spokesperson, Julian Sayers.
‘The improvement in commercial land is encouraging. However, with the downward pressure on arable prices we are currently seeing and the lack of foreign demand there is a risk that this more favourable trend could run out of steam,’ he added.
The analysis shows that demand for residential farmland has been in decline since the start of 2008 although it has rebounded slightly from the low of -64 at the end of last year.
In contrast, demand in the commercial sector has been strong, with 22% more surveyors reporting a rise than a fall, as large scale commercial farmers return to the market looking to expand their production. Evidence suggests that interest is localised and foreign demand, particularly from Irish farmers, is in decline.
Despite this improvement prices continue to fall, albeit modestly. Prices for bare land recorded a relatively modest fall of 1% with the weighted average falling from £12,336 per hectare to £12,172. Arable land fell 1% to £13,085 per hectare from £13,182 and pasture land saw a fall of 2% from £11,490 to £11,260 per hectare.
Residential farmland, shows a greater fall in prices, with the weighted average price of farmland falling 7.5% from £16,342 per hectare to £15,114.
The report shows that the outlook for prices is mixed, with the non-residential sector turning positive as 15% more surveyors expect price rises than falls, up from -42. In contrast, 9% more surveyors are still expecting prices to fall in the residential sector.
The twice-yearly RICS rural market survey aggregates farmland data across England, Wales and Scotland. The survey tracks national farmland market prices, demand, availability, yields and expectations broken down to a regional level. It looks as though it could be choppy waters ahead for the UK property market.