The steepest drop in British farmland prices in at least seven years may prove only a temporary setback to values, land agents said, forecasting "very strong" demand from farmers attempting to cash in on high crop prices.
Prices achieved in farm sales indicated a 6.7% tumble to an average of £7,794 per acre in prices in the first half of the year, compared with the second half of 2011, Rics, the chartererd surveyors organisation, said.
However, the decline - the sharpest since at least 2005, and deeper than that sustained during the world economic recession - may have reflected the historically low volume of sales during the period rather than being a true measure of market conditions.
The institution, saying that a "lack of market liquidity is likely to have played a role" in the drop, said that "we suspect the underlying [price] trend remains positive given the anecdotal evidence to this effect".
'Farmers remain keen'
Indeed, a survey of members, for an index which is typically less volatile than the deal-based measure, indicated a 1.8% rise in land prices to a record high of £6,628 per acre, a figure which excludes extras such as buildings and standing crops.
While demand from lifestyle buyers "continues to trend sideways", in line with the broader housing market, farmers retain a strong appetite for expanding their holdings.
"Commercial farmers - which account for over two thirds of all farm land purchases - remain keen to expand production onto neighbouring plots given high agricultural commodity prices in many sectors," Rics said.
Land agents were particularly upbeat over markets in Scotland, where underlying prices were soaring 12%, and the east of England, a major arable area, where agents estimated the increase in values at 9%.
"Some had predicted from the high levels that were achieved towards the end of the 2011 selling season land could only go one way and that was down," Jim Bryant, at Cambridge-based Bryant Land & Property, said.
"How wrong they were."
Jim Major, at Norfolk's Brown & Co, said that "highly-priced land in the market has sold and tended to bring some new land forward, which has been meeting a ready demand."
'Proving a downer'
However, land prices were seen falling in Wales and the West Midland, the most expensive farming area on Rics estimates, and where Agrimoney.com is based.
In Wales, Cooke & Arkwright's Simon Lloyd said that "sensibly-priced land is selling well, but smaller parcels which are often overpriced are, or can prove, slow to sell".
In the West Midlands, Birmingham-based Roger Stone said that the "wet season is proving a downer".
In Gloucestershire, Burton Knowles reported that "the residential farm/ smallholding market is becoming difficult – realistic pricing needed".