Farmland market: Outlook 2026

The farmland market has undergone a period of adjustment over the past year, with economic and political pressures taking hold.

In our ‘Outlook for 2025’ report, we said that the previous year was defined by a yearning for certainty, with hopes pinned on political stability and stronger commitments to domestic food production. By the close of 2025, however, the picture was still complex.

Market conditions

A steady start to the year gave way to a softening of values in the second quarter, reversing a five-year upward trend. Impending reforms to Agricultural Property Relief (APR) from inheritance tax (IHT), a lack of clarity over the future of the Sustainable Farming Incentive (SFI) and another year of average harvests have all contributed to hesitancy in the market.

In late December, the government raised the proposed APR threshold from £1m to £2.5 million, delivering welcome stability for many family farms and rural businesses. While it will still act as a catalyst for action for those who need to address succession issues and tax planning, we do not anticipate - nor seen evidence of - a widespread sale of assets before implementation in April.

Instead, the market remains shaped by ongoing structural challenges, namely commodity price volatility and eroding profit margins.

Profitability pressures

The cost of finance continues to be a key issue, affecting both new borrowing and the servicing of existing debt. While interest rates have started to ease, they are still high by recent standards, weighing on affordability and sentiment. Looking ahead, Oxford Economics forecasts two Bank Rate cuts in 2026, bringing it down to 3.25% by year-end. While this marks a positive shift, financing is likely to remain a barrier to investment by many small- to medium- scale farmers, many of whom may still struggle to access affordable credit.

Grain and dairy markets are under pressure compared to recent years, which could further widen the gap in land values with some producers having less purchasing leverage. However, demand for the highest-quality assets and silt or fen soils capable of delivering optimal yields is expected to stay resilient. Future market activity for secondary land will likely hinge on the availability of environmental schemes and diversification opportunities to help offset tight margins and stabilise income streams.

The year ahead

We anticipate a calculated yet active market in 2026, with conditions broadly balanced. Well-located commercial farms are expected to maintain premium values and benefit from a regional, or even national, market. In contrast, poorer-quality or isolated units are likely to face thinner demand and price corrections where local interest is limited. Market dynamics will continue to vary across and within regions, with some areas more saturated than others.

There is anecdotal evidence that some market participants are taking a longer-term view despite short-term pressures. Non-agricultural buyers – particularly institutional and environmental purchasers – are less exposed to these challenges and are unaffected by IHT changes and so may look to capitalise on a period of a lower land values. This is further supported by growing interest in natural capital opportunities, such as carbon credits and biodiversity net gain (BNG).

We expect rollover relief to remain a key driver of demand, and anticipated development land sales in 2026 could unlock capital for reinvestment. Buyers are likely to continue prioritising quality and scale, helping to underpin prime land values.

These factors point to a market that, while selective and more price-sensitive compared to recent years, remains underpinned by robust fundamentals.