FARMLAND prices are continuing to defy the general trend in the otherwise gloomy property market, according to bankers.

With the credit crisis already driving the housing market into stagnation and the forecast mortgage squeeze predicted to see further falls in house prices, the value of farmland is showing a steady rise.

Dozens of developers who had been planning major new building programmes on greenfield sites have shelved the projects and started laying off staff instead. But even that, apparently, has had a zero impact

NatWest and RBS regional agriculture director Andy Flint says that the trend has surprised many analysts.

"Growth rates have slowed but they are still growing," he said.

Recent research by Savills on its model, 1,000-acre Hampshire estate has only confirmed the pattern that, while the residential value as a proportion of the total value of the estate has fallen from its 2003 peak of 45 per cent down to 25 per cent in 2008, the total value of the estate continues to increase, due to the upward trend in farmland values.

And land values have now risen steadily since the early 1960s with only a very few exceptions: the mid-1980s, the early years of the Nineties and this century, when average values fell before continuing their upward progress.

But, said Mr Flint: "Land is a finite resource and it is actually diminishing: the agricultural land bank in the UK is decreasing by an estimated 30,000 hectares a year as land is diverted to other uses, whether for roads, housing, industry or forestry.

"The amount of land sold is a very small proportion of the total farmland, which creates scarcity while demand remains strong.

Only 75,000 hectares were publicly marketed in 2007, and that's about 0.6 per cent of the total, whereas in the 1960s figure was about 1.5 per cent."

MR Flint said the outlook for the industry appeared more optimistic than it had for some time.

"Some hedge-fund mangers are now turning their attention to the more basic commodity – agricultural land.

"They see this as a good investment over a five- to 10-year period capable of generating a 10-15 per cent net return," he said. "The rationale behind this decision is based on a number of factors. The world's population is forecast to grow by more than 40 per cent by 2050, significantly increasing the demand for food.

"In many developing areas of the world, people are becoming more affluent which in turn increases meat consumption, increasing the amount of grain required to feed livestock, however agricultural productivity increases are slowing."