Farmland values continued to edge downwards slightly in the final quarter of the year, but are expected to rebound in the first half of 2012.  

English farmland prices rose on average by a modest 4% during the year, following consecutive drops of almost 1% in each of the final two quarters. Prices, however, remain close to record levels.

According to the Knight Frank Farmland Index, bare agricultural land is still worth almost £6,050/acre. That is about treble the price being achieved 10 years ago.

Although annual growth of just 4% might be considered slightly disappointing compared with farmland’s recent performance, it is still robust given the economic situation facing the UK and global economies. Stock market performance, for example, has been far more disappointing during the year.

At the end of Q3 when values fell by 1% we predicted that the farmland market might weaken slightly more before the end of the year, so this quarter’s drop of 0.8% comes as no surprise.

But prices look set to bounce back next year, according to Clive Hopkins, Head of Knight Frank’s Farm and Estate Sales team.

“I think that values will rise by seven to 10% in the first half of 2012, and then remain steady for the rest of the year as an increase in supply pegs back growth.

“The early part of the year tends to be when we see most activity in the market as subsidy cheques arrive and farmers put into action the plans they have been making over the winter.

“We also expect investors to remain interested in farmland. It is becoming more well-known as an asset class with a proven track record of capital growth. Unlike many other investments, it can also offer lifestyle opportunities that can be enjoyed, as well as a decent income.

Read the full report and see how farmland has performed against other assets

Find out what the implications of the Common Agriltural Policy could be for UK farmers