FARMLAND is being targeted by a new breed of investors who are fuelling demand and increasing prices, says a survey just published by the Royal Institution of Chartered Surveyors.

It points out that the investment drive into rural areas has started affecting local economies with some shifts from agriculture to the service industry and real estate markets in some parts of the region.

The trend is more apparent nearer the larger cities and towns than in the more remote rural, traditional farming areas.

Gwyn Williams of Williams Parry Richards in Ross-on-Wye, and regional rural spokesperson for the institution in the West Midlands, said the last quarter had seen a marked increase in the amount of farmland available on the market, given the shortage from the previous 18 months due to the Mid-Term Review.

Land, he said, had been fetching £6,000 to £7,000 per acre in recent months, with some higher prices on small lots near residential areas.

Looking at the national picture, the survey comments that farmland is being targeted by a new breed of investors, fuelling demand and raising prices to almost £10,000 per hectare.

The survey shows that prices have risen by 30% in 13 months and despite this increase, demand for farmland as an alternative investment source has not weakened, with almost 50% of new buyers being non-farmers.

John Amos of John Amos and Co of Barn Hall, Orleton, pointed out that although prices had risen, they were not necessarily so high if index-linked figures were related to the past 20 years or so.

In reality, the majority of land was still being bought by the farming community.

During recent times, owners had held onto land because of the Mid-Term Review but he did not consider the land sale floodgates would open up in the foreseeable future.

In Herefordshire, only two or three farms had been coming onto the market annually while the norm had been some 10 to 15.

Tax planning was a major consideration, remarked Mr Amos. While a £1 million farm might be given away, a cash transaction would be subject to a 40 per cent tax penalty.