Danish farmers, hedge fund managers and investment bankers all want a piece of the rich soil of England - and the price of an acre has risen to a record as a result.

The price of farmland has risen 28 per cent to £10,439 per hectare, its highest value so far and the fastest pace of growth in the 11 years since the Royal Institution of Chartered Surveyors (RICS) has tracked the rural land market. A farmer must pay 56 per cent more for land than at the end of 2004, during which time global grain prices have also soared.

Demand is expected to remain strong for British farmland. Sue Steer, a spokeswoman for RICS, said: “Rising commodity prices have resulted in a bit of feeding frenzy for farmland as farmers compete with investors and foreign farmers for arable land.”

On Friday, the March wheat contract in Minneapolis hit a record $15.53 a bushel, up 10.7 per cent over the week, while wheat reached a record $10.93 a bushel on the Chicago Board of Trade (CBOT), up 15.9 per cent in a week. Wheat traded at $7.88 a bushel on CBOT at the end of August.

Property agents' confidence in further farmland price inflation is running at an 11 year-high, with a balance of 60 per cent of surveyors forecasting prices to rise over the coming year, according to findings from the RICS. That should translate into average price rises of at least 10 per cent in 2008.

David Ward, of the Fenn Wright agency in Colchester, said: “Farming purchasers are more confident in the market, buoyed by improving commodity prices. They face stiff competition from investors looking for alternative forms of investment following the slowdown in the residential market.”

Changes to capital gains tax to take effect in April may loosen rural supply before then, but that is unlikely to dampen price inflation as demand remains so high. Current rules on taper relief for capital gains tax allow those owning property for ten years to pay tax at a reduced rate of 18 per cent, compared with the standard 40 per cent tax rate. Proposed changes would scrap taper relief in favour of a flat 24 per cent rate, which may prompt long-term owners to sell before April.

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