English arable land prices have risen by 5 per cent in the last 12 months and now stand at £3,061 an acre, according to the latest figures from Strutt & Parker’s Farmland Database.

The new figures also reveal the return of farmers as a significant buying force in the market. In the 12 months to the end of September, working farmers bought as many of the farms being sold by Strutt & Parker as the so-called “lifestyle” buyers who have dominated the market in recent years.

But Mark McAndrew of Strutt & Parker’s Estate and Farm Agency Department says both farmers and lifestyle buyers are having to contend with a continuing shortage of land for sale.

“For almost five years – thanks to external factors like Foot and Mouth, the Mid Term Review and the introduction of Single Payments - the land market had been living with tremendous uncertainty and the amount being offered for sale had fallen dramatically. But with that uncertainty now effectively at an end this year, I had expected the volume of land for sale to rise significantly. But that just hasn’t happened yet.

The new figures reveal that 113,784 acres of land were launched on to the market in England in the last 12 months, which was 13 per cent up on the preceding 12 months but still well below market expectations for a 30-40 per cent uplift. In the third quarter of 2006 – the latest period for which figures are available – 29,285 acres were launched on to the market, 2.5 per cent down on the same period last year.

Actual sales were rather stronger, with 65,160 acres sold in the year to end-September, some 26 per cent up on the same period last year. However, in the third quarter of 2006, only 13,723 acres were sold, some 36 per cent down on the same period last year.

“We’ve certainly sold just about every farm we launched on the market this spring and we’re already well on the way to repeating that with our autumn sales too. There are a lot of confident, well-financed prospective buyers out there right now and that’s why prices are rising and should continue to rise. I certainly expect land prices to increase by another 5-10 per cent in 2007.

Mr McAndrew believes an increased confidence in commodity prices is the reason why farmers have returned to the market so strongly. In the year to end-September, they bought 47 per cent of the farms being sold by Strutt & Parker, matching the well-established purchasing power of wealthy lifestyle buyers. But in the third quarter of the year, farmers bought 70 per cent of farms.

“It would be wrong to read very much into one quarter’s results,” says Mr McAndrew, “but there’s no doubt that farmers are definitely back in the market. Forward grain prices are significantly ahead of projections, most of them have had a decent harvest and, in the longer term, there is a growing feeling that soft commodity prices will rise.”

Overseas farmers continue to play an active role in the market, says Mr McAndrew. “We’re seeing farmers from Europe, particularly from Ireland and Denmark, buying substantial amounts of land here where land is still far cheaper. And they are not buying as investments but to farm here actively themselves.

Mr McAndrew also points out that the gap between arable land values and grassland values continues to narrow, with lifestyle buyers often preferring to buy grassland units and being prepared to pay for them. Grassland now averages £3,016 per acre.