Record High for English Farmland Values

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English farmland values have reached a record high, driven by population growth and a short supply of farmlands, according to data from Knight Frank.

The firm's farmland index shows a seven percent increase in values in 2013, reaching an average of just below £6,700 per acre, with further growth predicted for 2014.

The average selling price for large blocks of investment-grade arable land is more than £10,000 per acre, according to the Financial Times.

Over the last decade, average values have increase by a whopping 222 percent, compared to a 58 percent increase for the FTSE 100 and 132 percent jump for prime central London residential property, the FT reports.

The growth in farmland values is driven by demography, analysts say.

"Today, population growth is a global issue and the demand for food continues to grow." Tom Raynham, head of Knight Frank's agricultural investment acquisitions team, told the FT. "Acquiring farmland is one way for investors to buy into this trend."

Farmland provides investors with more stability, with less volatile performance than other major asset classes, Mr. Raynham said.

"Although commodities such as wheat do experience significant price swings, agricultural support payments in the UK, along with the rest of the European Union, help to mitigate the impact of adverse weather conditions and global economic downturns," he said.

A farmland shortage is a main driver for the market's performance. At the end of 2013, 125,000 acres of land were publicly marketed in the U.K. Fifteen years ago, buyers had almost 200,000 more acres to trade, FT reports.

Another incentive for farmland buyers are tax benefits, which include exemptions from inheritance tax and capital gains tax in certain circumstances, the ability to offset any losses from the farm against profits made elsewhere, and benefits through value added tax.

However, HM Revenue & Customs is working to make sure only those actively farming the land receive tax benefits, instead of those looking to live in a large house in a rural location, the paper said.