SOUTH West farmland is being targeted by a new breed of investors, fuelling demand and raising prices, according to the Royal Institution of Chartered Surveyors.

The average price of farmland for the third quarter 2004 continued to edge closer to £10,000 per hectare, with price rises rivalling those of the residential sector in the past year, the RICS told South West Farmer.

An official said: "In the South West, arable land averaged £6,795 per hectare and pasture averaged £5,595 per hectare. Overall prices have risen by up to 30 per cent in 12 months and 130 per cent since the 1990s. Although prices continue to rise, this has not weakened demand as non-farmer buyers look to farmland as a source of investment."

"In the South West, 54 per cent of purchases were made by non-farmers. A possible reason for this could be relief from inheritance tax, but a more likely explanation centres around non-farmers buying neighbouring farmland to protect the expensive residential property they have purchased." Latent demand is strong but sellers are few, so sales have declined to their lowest level recorded by the survey.

Despite the sale of farmland declining over the third quarter, surveyors remain confident that prices for the next year will continue to rise. It is expected that rising interest rates will curb future rises in prices, while clearer understanding of the Single Farm Payment regime may lead to more availability of land next year.

Quarterly reports on the RICS survey provide details of sales with vacant possession and tenanted sales in England and Wales only. All other information relates to England, Wales and Scotland. The survey records sales of five hectares and above but excludes land sold for development or forestry, gifts, inheritances, and compulsory purchases. Farmland where the farmhouse constitutes more than 50 per cent of the sale price is analysed separately.