Rural retreats for City workers are becoming a dream of the past as demand for homes in the countryside dries up.
A torrent of redundancies in the financial sector and cuts in bonuses have meant that countryside properties, once the aspiration of many high-earning bankers, are no longer in demand.
The number of buyers for residential farmland plummeted in the second half of 2008, according to the Royal Institution of Chartered Surveyors, as so-called lifestyle farm dwellers all but disappeared.
The Rics rural market survey shows that the balance of surveyors reporting a decrease in demand for residential farmland fell from -3 per cent to -64 per cent in the second half of 2008. The change is even more stark when compared with a year ago, when the net balance was a positive 50 per cent and residential country properties were highly sought after.
Surveyors report that the market is showing signs of further deterioration. Lifestyle buyers are expected to continue to dwindle as long as the challenging financial climate persists.
The net balance of surveyors expecting price rises in residential farmland fell from -25 per cent to -79 per cent in Monday’s survey.
“The downturn in the economy has made many from the financial services sector rethink their lifestyle priorities, putting an end to city expansion into rural areas,” said Sue Steer of Rics.
“Prices for farmland peaked in the first half of 2008, and lower commodity prices and an uncertain financial climate could push prices lower in the first half of 2009.”
The boom in financial services had helped send prices skyrocketing, with the value of farmland rising more than 100 per cent on average between 2006 and 2008. Lifestyle investors accounted for about 30 per cent of the farmland market.
But farmland prices for bare land fell 5 per cent in the second half of 2008, according to the Rics opinion survey. The weighted average price dropped from £12,965 per hectare to £12,336. Arable land fell 9 per cent from £14,453 per hectare to £13,182, while the price of pasture land declined marginally to £11,490.
However, the Rics transaction-based measure for farmland prices suggests that
the weighted average price rose from £15,825 per hectare to £16,318.
Historically, the opinion-based measure has tended to turn sooner than the transaction-based measure, owing to the time lags involved in the sales process.
Surveyors remain pessimistic about the outlook for farmland prices. In the non-residential sector, 42 per cent more surveyors expect prices to fall rather than rise – the lowest recorded level since 2003.