The cost of farm property looks likely to soar as traditional British “lifestyle farmers” are joined by multimillion-pound investors hurriedly moving their wealth out of stocks and shares and into farmland. Across the world, hedge fund managers, property developers and other investors are turning their eyes to places such as Russia, Argentina and Uruguay, where farms are thought to be underdeveloped and provide an opportunity to profit from the rising prices of staples such as wheat, barley and oil-seed rape.

Britain is likely to feel the effects because our farmland is cheap by Western European standards. Marc Duschenes, of the property company Braemar, hopes that the surge in grain prices will persuade hard-pressed British farmers to sell their land. Braemar aims to raise £20 million for its agricultural land fund. “We are speculating that commodity prices will feed through into higher land prices,” says Duschenes. Carter Jonas is quoting forecasts of prices increases of 10-15 per cent this year.


At the same time lifestyle farmers - typically City high-fliers - have become the largest group involved in buying British farmland. According to Mark Ashbridge, of Savills Private Finance, 40 to 45 per cent of farm purchases are now made by lifestyle farmers. Knight Frank puts the figure at 38 per cent, with only 32 per cent of farm purchases by “genuine” farmers. Institutional investors (11 per cent), agribusiness (11 per cent) and developers (6 per cent) account for the rest of the purchases, Knight Frank says. This mounting interest, combined with a shortage of supply, has meant increases of up to 40 per cent in the price of UK farmland in 2007.

Nevertheless, now could be a good time to buy a farm, Ashbridge says. Although supply has tightened over the past few decades, he believes that an increasing number of farms could come on the market in the next few months. In April, the Chancellor is due to cut the rate of capital gains tax from 40 to 18 per cent and abolish the taper relief system under which people who had held assets for a long time could pay a capital gains tax bill of only 10 per cent. In addition, indexation relief is also to be abolished in April. “For someone who has owned their farm for many years, the changes could double their tax bill when they sell,” Ashbridge says.