They shrank away from the housing market during the worst of the downturn, but signs are emerging that lifestyle buyers have resumed their hunt for a farmhouse in the English countryside.

Knight Frank, the upmarket estate agent, said that sales of farm properties are back to levels seen early last year. Price falls for farmhouses slowed to minus 0.3 per cent in the second quarter, compared with falls of 4 per cent, 8.3 per cent and 4.5 per cent in the previous three quarters. The price of farmland rose by 3.1 per cent in the second quarter of 2009, according to the agent.

Most of the buyers were professional farmers, but Knight Frank said that househunters in search of an agrarian idyll, with room for some sheep and chickens rather than a full working farm, were again booking viewings.

Andrew Shirley, head of rural research for Knight Frank, said: “Lifestyle buyers of smaller farms with a bit of land are looking for the same reason that buyers are looking in other areas — they feel more confident about their jobs etc, and see now as a good time to secure an attractive house in the countryside.”

However, would-be smallholding buyers are not back in the same numbers as in 2007, when setting up a small organic subsistence farm was at the height of popularity and lifestyle buyers overtook farmers as No 1 purchasers of these homes.

Tim Jones, head of rural property at Carter Jonas, said: “They are not as prevalent as they once were.” Demand from investors has also helped to support rural prices. Investors have been attracted by higher annual returns on farmland compared with other asset classes. The Investment Property Index reported yesterday that farmland delivered a positive annual total return of 1.7 per cent in 2008, compared with a minus 22.1 per cent return on commercial property and 15.3 per cent in residential. Carter Jonas said that farm rents had risen by up to 30 per cent.

In a sign that renewed confidence has spread to other quarters of the property market, equity-rich foreign investors have swooped on prime office buildings in London to take advantage of lower prices, leaving fewer pickings for the many vulture funds that are waiting in the wings.

Cushman & Wakefield said that investment in Central London had increased by 110 per cent in the second quarter to £1.433 billion, compared with £679 million in the first quarter. It attributed the increase to a resurgence of interest from foreign buyers, which in turn has begun to put pressure on yields. Cushman & Wakefield said that six of its twenty-five key yield indicators had fallen as a result of the weight of foreign money chasing prime UK property assets.

David Hutchings, head of research at Cushman & Wakefield, said: “Now we have more stressed buyers who cannot find what they are looking for than distressed sellers. A lot of these funds have been waiting in the wings and are now finding it difficult to find real distressed assets.”

A number of funds such as Max Property, run by Nick Leslau, have been launched with the aim of picking up distressed assets. However, they have yet to start buying in earnest. Other funds, such as Blackstone Real Estate Partners Europe III, which closed last week after raising €3.1 billion (£2.7 billion), are aimed at buying real estate debt rather than assets. Hutchings said: “This avoids the problem of that there are few quality assets for sale.”

The lack of supply of development land has forced some builders to enlist the help of agents to find sites for them. Banks are said to be studying developments where the owners are in difficulty to assess sites that will yield a reasonable profit once completed. Developers whose schemes appear unlikely to meet this target will face repossession, while financially sound companies will be standing by to pick up these sites at advantageous prices.

James Gibson, of Sovereign, a housing association, said: “It’s reassuring to see advertisements for land managers placed by developers in publications such as Estates Gazette — this is a sign of returning confidence. These professionals will be out looking for opportunities, whether half-finished schemes on which homes have already been built, or empty plots.”

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