Rush for Rural Land in Uk capital London also in Queue

Money managers in London are shopping not for weekend houses but for investments.

Investors have been snapping up farms, rural estates and other agricultural land in the U.S., Argentina, Russia and Australia for the past few years, as rising commodity prices, growing food demand from China and the push to turn crops into biofuels have made rural land there more popular. Now, the trend has spread to Britain, where investors are betting that the value of farmland -- up sharply last year -- will continue to outperform other real-estate investments.

Prices of arable land for sale in Britain rose 28% last year to about £3,446, or roughly $6,800, for about half a hectare, according to Savills PLC, a real-estate services firm based in London. In contrast, prices of residential property in the U.K. rose between 6.5% and 7% last year, says the agent, while those of commercial property fell 8.6%, according to the London real-estate-information firm IPD.

With farmland prices surging, "we've got investors and buyers desperate to get into the market," says Liam Bailey, head of research at British estate agent Knight Frank. But the volume of land that comes on the market is in short supply compared with the new demand from investors and farmers attracted by potential profits. "We've seen commodity prices shoot up, and the returns from agricultural land get very interesting," he says.

Whether funds will be able to invest in British land in a significant way remains a question. Only about 72,000 hectares of farmland are openly marketed in the U.K. each year, down about 30% from the late 1990s, says Crispin Holborow, head of Savills's farm agency. "The difficulty for the sums in investing in the U.K. is it's hard for investors to buy land. It's difficult to find," he says.

Nevertheless, farmland has been in short supply, in part because rather than sell, some farmers are looking to expand their own acreage, agents say, to benefit from the rising commodity prices. The price of wheat, Britain's biggest cereal crop, has nearly doubled in the past year, and barley is up 80%, according to the Department of Environment, Food and Rural Affairs.

Source: http://online.wsj.com