Demand for farmland is continuing to rise across East Anglia - with environmental buyers now entering the fray.

Much is still uncertain around future UK land policy - while farmers grapple with the loss of what was their main subsidy.

The Basic Payment Scheme (BPS) - now being phased out - was a lifeline for farmers when the UK was part of the EU's Common Agricultural Policy (CAP).

But with a big shift towards "public money for public goods" and rewarding farmers for their environmental efforts rather than growing food, land agents are seeing another type of buyer emerge. This is helping to push land prices up.

“Tax-driven buyers looking to reinvest the proceeds from development or compulsory purchase sales remain significant players in the East Anglia farmland market - but interest from the growing number of environmentally-motivated purchasers is also increasing," explained Oliver Holloway of Clarke and Simpson.

"Although the return from traditional arable farming is likely to diminish due to the cessation of Basic Payment from 2024, in the short to medium term, the imbalance between supply and demand looks unlikely to shift - meaning farmland values are likely to stay relatively firm."

Following last year’s political turbulence in the UK, the region's land experts are viewing last week’s spring budget as considerably more benign.

Land purchasers generally take a longer term view anyway, they say, and look to long-term opportunities.

"On the one hand we have the short-term uncertainty of a potential recession or future change of government, while on the other, there are still a number of factors generating demand for farmland and bringing in investment from those outside agriculture," said Mr Holloway.

A recent sale by Clarke and Simpson demonstrated the strength of the market. Rookery Farm at Kettleburgh, near Framlingham, was snapped up for more than its guide price of £3.2m - and within two weeks of marketing it.

Simon Gooderham, joint managing partner at Cheffins, forecast that despite a potential change in government next year, demand for farmland in East Anglia would continue unabated.

"The demand for farmland and the relative lack of stock will continue to buoy farming economies," he said.

"We predict that demand will continue to outstrip supply, but buyers may well have more choice as the changes to grant funding muddy the waters in terms of subsidies.

"While grant funding and environmental schemes will still require some getting used to, these will continue to back up farmers throughout East Anglia, and help the farming economy to remain resilient to wider political changes.”

Cheffins recently started marketing Field Barn Farm at Thetford on the edge of the forest with a guide price of £2.2m.

William Hargreaves, who leads the rural team at Savills in Suffolk, admitted that changes to agricultural support, together with challenges caused by food supply chain pressures, rising input costs and extreme weather events mean many rural enterprises are adapting their business models and carefully considering options for the future.

He expects that trend will continue - and that environmental uses with financial rewards will increasingly become a feature.

“However, regardless of whichever political party is in charge, the importance of farmers and agriculture to the economy and wider society is unquestioned," he added.

"From food security and encouraging biodiversity through wildlife and landscape management, through to helping with people’s physical and mental health by allowing access to land and generating renewable energy and sequestering carbon in the soil in an effort to help tackle issues around climate change – landowners and farmers are uniquely placed to help address many of the issues currently facing the UK.

“Of course there are likely to be challenges ahead – but that also means there will be plenty of opportunity. A new government could lead to changes in capital taxation which may well affect the land market, but demand for farmland in the East of England continues to be strong and we expect prices to remain robust."

Jonathan Armitage, Head of Farming at Strutt & Parker, said the farming industry was operating in "a very noisy and confusing business environment" at the moment.

"Fluctuating input costs, labour shortages and volatile grain and oilseed markets mean there is significant uncertainty when it comes to farm business profitability.

"Meanwhile, the new Environmental Land Management (ELM) schemes have been introduced in a piecemeal and confusing way.

"We have also seen a step change in terms of public attitudes, with more being asked of farmers and land use to address climate change and the biodiversity crisis."

Falls in commodity prices over recent months and Basic Payment cuts which mean a farmer with 200ha of land who received a BPS payment of about £47k in 2020, will only receive £29,500 this year are starting to bite, he said.

"Growers are likely to be facing a cash squeeze over the coming months and years.

"Those that will thrive are the ones who are proactively identifying their risks, so they can reduce them, while at the same time reviewing all opportunities to generate additional income through diversification, renewables, improved productivity and environmental markets.

"But stability is critical when it comes to business planning so whatever government we have next, the farming industry needs this ‘noisy and confusing’ picture to settle down and be managed in a coherent way from the centre."

Giles Allen of Strutt & Parker said despite the pressures, the East Anglian farm land market remains strong with demand outstripping supply - and prices were rising.

"But this should not be a complete surprise as there has not been a direct correlation between farming profitability and land prices for a long time.

"There are many reasons as to why people buy land, with many of them using money generated outside the farming industry."

However, the importance of food in policy - or lack of it - remains a concern and that must be something which changes over time, he suggested.

"Farmers and landowners have had to grapple with a myriad of changes over the last few years, so it’s also important that any potential changes to support payments or policy that might arise are clearly communicated.”