Farmland prices in the UK reached an all time high in the last half of 2010, as demand for commercial farmland grew strongly against continued shortage of available land, according to the latest report from the Royal Institute of Chartered Surveyors.

Chartered surveyors indicated commercial farmers remain keen to expand production to capitalise on elevated commodity prices. This, combined with falling land availability, saw farmland prices rise to all time highs during the last six months of 2010.

The transaction based measure of prices, which includes residential land, stood at just under £17,000 per hectare, while opinion based, which covers just bare land, approached £14,500 per hectare. Both prices measures rose by roughly 6%, the RICS Rural Land Market Survey which covers England, Wales and Scotland shows.

During the last six months of 2010 all areas of Great Britain experienced rising farmland prices with the exception of Scotland, with prices there falling by 8%. The East Midlands saw the strongest price rises, up 17%, followed by the North West at 12%.

Farmland was most expensive in the North West at £17,300 per hectare, while the cheapest land was in Scotland, priced at £9,100.

Demand continued to strengthen for both types of farmland, but 55% more surveyors reported demand rose rather than fell for commercial farmland, compared to only 6% for residential. This marks the fourth year running where the pace of demand for commercial outperformed residential. Residential farmland demand remains more subdued, as it broadly reflects the national housing picture.

Land availability has now been falling in both the commercial and residential sectors for two and a half years. Given the lack of supply to the market, surveyors expect the recent trend in farmland prices to continue over the next twelve months; with strong growth in the commercial farmland market but a flatter trend in the residential sector.

‘The last six months of 2010 saw further strong gains in farmland prices as commodity prices continued to move upwards. Commercial farmers are increasingly keen to purchase prime farmland to expand their businesses, and this strong demand is keeping the market very active,’ said RICS spokesperson, Sue Steer.

‘This, combined with lack of supply of good quality land can only lead to even higher prices over the next 12 months. In comparison, the residential farmland market remains relatively subdued, reflecting the broader national housing picture,’ she added.