UK farmland prices have fallen below £4,700 an acre, wiping out nearly all the gains of last spring when prices rocketed to a record high.

The average price of UK land dropped 2.6% to £4,670 an acre (£11,500 a hectare) during the first three months of the year, data from Knight Frank shows.

The fall left values 8.4% adrift of the record highs reached in the April-to-June period last year, when prices averaged £5,100 an acre, and good farmland frequently achieved more than £7,000 an acre.

'Signs of recovery'

However, the rate of decline represented a slowdown from the 5.2% seen in the last three months of 2008 when credit crunch fears were at their height.

Andrew Shirley, Knight Frank's head of rural property research, said the data showed that the land market had "started to show signs of recovery".

"Our farms and valuations teams are reporting renewed confidence amongst farmers, with deals on arable land routinely being done at over £5,000 an acre and in some cases in excess of £6,000 an acre," he said.

Prices were poised to "steadily increase" over the next few years, helped by reviving credit flows and the quest by investors for inflation-proof assets, the property consultancy added.

Subsidy threat

Nonetheless, Knight Frank added that it did not expect land values to return "immediately to the dizzy heights of last year", and warned that waning prospects for European Union subsidies meant that farmers would be more picky about purchases.

"It is the most productive and profitable land that will be most keenly sought after," Mr Shirley said.