ClickAJob News

While prices for arable land in the UK have hit record highs in the UK, according to the Royal Institution of Chartered Surveyors (Rics), commercial property may be on the verge of a slump.

While the farmland market jumped forward as whole, with the average price rising by 24 per cent - the fastest pace in the survey’s history - from £10,439 to £12,965 in the first half of 2008 and by 47 percent year on year – it was a divided picture.

In the residential sector, demand for farmland remained essentially flat during the first half of 2008 (having grown very strongly during the last two years), with lifestyle buyers withdrawing from the market.

However, the other engine of growth, the commercial farmer, largely remains intact, buoyed by record food prices in world markets.

Indeed, the share of purchases by individual farmers and agricultural businesses jumped respectively from 50 per cent to 56 per cent and from five per cent to eight per cent.

This was offset by a fall in the share of non-farmers purchases from 37 per cent to 27 per cent.

Yet, these record high prices are likely to represent the high watermark of the market.

Demand from lifestyle buyers will continue to be depressed by the more challenging environment during the second half of the year, predicts Rics.

Meanwhile, in the commercial arena, one of the implications of record food and commodity prices in world markets is that input prices (in the form of animal feed and fuel) are also soaring.

This makes smaller farms unprofitable, increases supply and consequently reduces prices.

"Ever rising commodity prices have pushed the price of farmland to record highs as farmers and investors compete for arable land," said Rics spokesperson, Julian Sayers.

"However, the days of the lifestyle buyer are on the wane.

"The credit crunch is putting an end to city expansion into the country as the precarious financial situation has made city slickers re-think their lifestyle priorities," he concluded.