Farmland values in Great Britain should remain steady but there may be some volatility as subsidy reform begins to take effect, Savills warns in its January 2021 Farmland Market report.

In the short-term (up to five years), it is likely land prices will stay firm as pent-up demand filters through the market, the report says.

Quality farms and those with strong amenity value and scale are expected to be in great demand.

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There may also be some localised volatility in areas most vulnerable to subsidy reform and trade adjustments.

Factors likely to strengthen the farmland market include strong macroeconomic drivers (such as low interest rates); competing land uses (lifestyle, tourism, energy infrastructure and development); amenity/lifestyle attraction (particularly strong since the first Covid-19 lockdown); and natural capital.

On the other hand, subsidy reform, a major supply increase and potential tax changes could drive values down.

Taking all these factors into account, Savills has forecast a 0.7% annualised decrease in average values over the next five years, with supply starting to recover back to pre-Brexit vote levels.

Medium to long term

Looking further ahead (six-plus years), Savills expects caution to give way to renewed investor confidence after the initial shock of subsidy reform and Brexit abates.

Farmland has a long history as a safe, secure asset, particularly during times of economic uncertainty, and there is no reason why this should not continue, the report says.