The number of large investors queuing to buy UK farmland has hit its highest in three years, but demand is focused on high-quality arable operations, whose premium over low-quality grassland continues to increase.
Savills, the land consultancy, said that the number of investors with £5m-10m to spend on farmland had risen to its highest quarterly total in three years, some 13% above the average.
"There has been an increase in the number of applicants who have deeper pockets for buying farmland", said the group, which has investors with some £6bn to spend on farmland on its books.
"A large proportion of these funds will still be available into next year," given the shortage of farmland for sale, with the supply of 128,000 hectares in the first nine months "historically low", the group said.
What is in demand
However, buyers were focused on high quality arable farms, particularly in the east of England – a factor reflected in price growth which has hit 8.5% in the January-to-September period, taking average values nearly to £8,300 an acre.
That includes growth of 2.3% in the latest quarter.
"What they want is top quality, big farms, that will give them price appreciation and a bit of yield," Ian Bailey, Savills' head of rural research, told Agrimoney.com.
"They are looking for big blocks of arable land. It is that market which has been doing best."
However, there were differences within the market, with investors preferring the east of England which government data last week reaffirmed as the best yielding for wheat, with an average of 7.9 tonnes per hectare.
That increased its advantage over wetter western areas, which were hurt particularly by the wet spell in 2012 and in the early months of 2013, with north west yields this year averaging 5.4 tonnes per hectare.
In the land market, while prime arable farms in the east of England land appreciated by 4.6% in the July-to-September quarter, the market in western areas, including Wales, stagnated.
Indeed, in Wales, research "indicates no change in prime arable values since December", leaving them at about £7,000 an acre.
In the market for smaller and grassland farms too, and those where residential assets make up a large proportion of the overall value, activity "is really sluggish", Mr Bailey said.
"For a stock farm of 150 acres, you are probably looking at sub-5% price growth, compared with 8-10% for the top end."
The group said it was "comfortable" with its forecast for farmland values overall rising by 8.8% this year, but acknowledged that prices of top arable operations, and "the best" dairy farms, would see stronger growth.