Farmers have seen their land values soar by 30 per cent in a year. With markets in turbulence and surging global food prices making agriculture profitable, land is now seen as a safe haven for cash and pension funds.

City institutions, led by Blackrock, UBS and Schroders, are setting up funds to invest in land and agribusiness. Other hedge funds are exploring the market. They are in competition with British farmers and businessmen from Ireland, Denmark and the Netherlands, where land is even more expensive.

The interest is driving up the price of land and rural agents are predicting that values this year will increase by another 15 to 20 per cent. A report by Knight Frank, the estate agency, estimates that land prices went up a further 15 per cent in the first three months of the year. Just before Easter 350 acres of Grade 2 land at West Farm, Fovant, Wiltshire, was marketed by Savills at £5,500 an acre. It sold for £6,900 an acre. A similarly high price is expected for the 840-acre Grange Farm, at South Kyne, Lincolnshire, put on the market by Strutt & Parker this week. It has a guide price of £6.5 million to include a four-bedroom Victorian farmhouse, two cottages and farm buildings.

But there is a dark shadow on the landscape: demand is outstripping supply and competition is so cutthroat that sales are now being conducted in secret and off market. Land ownership is recorded in the Land Registry but if people are unaware of a transaction few bother to look up the details. Often the sales are of 1,000-acre tracts and do not include a traditional country house, so change of ownership is also obscured.

A flurry of land sales took place before this month because farmers sold up to escape higher rates of capital gains tax. Otherwise the main supply of land coming on the market is when farmers divorce, retire or die. The other sellers are investors who have no attachment to the land but wish to get their hands on the cash.

These profits are becoming a new form of hush money. Charlie Evans, associate at Strutt & Parker, said: “It seems to be the pattern. Farmers and sellers will do a deal as long as it is not heard. A lot of trading is off market.”

Robert Law, 49, farms 3,200 acres on the Hertfordshire-Cambridgeshire borders. He said that farmers did not like to advertise if they made money. “There is a lot of hot money wishing to go into land but there is very little for sale. Farmers are clinging on to their land.”

Cash crop

£3,500 Price of an average acre of farmland a year ago
£5,000 Price that an acre is close to fetching today
£7,000 Price today of an acre of prime arable land
£10,000 Rural market experts say this will be the cost of an acre within three years

Source: estate agencies

Explore Economics

• Autumn Budget 2007

• Budget 2008

• World Economic Forum

• The Times MPC

Times Recommends

• Bovis and Redrow axe close to 1,000 jobs
• Irate M&S shareholders demand fresh talks
• Investors rally to B&B amid fears of contagion