Investors are turning to the countryside as safe havens for their money in the wake of the property price collapse and stock market turmoil, writes REG LITTLE

Farmland prices in Oxfordshire have been hitting record highs as investors have sought safe havens for their money in the countryside. With property prices continuing to fall and stock markets in turmoil, farmland it seems is fast becoming the new gold as a safe bet in troubled times.

A new report from the Royal Institute of Chartered Surveyors shows UK farmland prices in the first half of the year surged at their fastest pace since the institute began producing rural market surveys.

Sharp rises in food and commodity prices such as wheat have certainly boosted the rural land market locally. But in Oxfordshire other local factors are also at work such as the possibility of Oxford's expansion opening the way for building on the Green Belt and the fact that some farmland is subject to 100 per cent inheritance tax relief.

It will surprise many that the unprecedented land grab is being led by investors who want to buy into an industry for so long viewed as being addicted to European subsidies, rather than people wishing to buy into the country lifestyle.

RICS spokesman Julian Sayers said: "Ever rising commodity prices have pushed the price of farmland to record highs as farmers and investors compete for arable land. However, the days of the lifestyle are on the wane. The credit crunch is putting an end to city expansion into the country as the precarious financial situation has made city slickers re-think their lifestyle priorities."

The survey showed the average value jumped from £10,439 per hectare to £12,965, equivalent to a 47 per cent increase over a year. The number of farmland sales also surged by almost half.

National Farmers' Union spokesman Mike Thomas said: "This year has seen continuing increases in land prices as demand continues to outstrip supply. The old adage 'land is valuable because they don't make it anymore', is never more apt.

"The NFU believes that, in the long term, we will see greater stability; a slowing of price rises as the reality of increased energy and input costs bites and some residential and institutional buyers fall out of the farming market because of the credit squeeze.

"Nevertheless, this scenario sees farmland prices double those of five years ago."

Jonathan Perks, a rural surveyor based at Carter Jonas's Oxford office, said the recent burst in activity comes after a period of relative stagnation. The changes to the subsidy system designed to reward environmentally friendly farming practices (Single Payment Scheme) initially created uncertainty about whether key subsidies were transferable.

But the present corporate gloom has changed the climate in the country as well as the city. He said there was a combination of farming families looking to expand and investors confident there will continue to be money in farming, despite this wettest of summers, which killed off early optimism about yields.

Mr Perks believes the increased cost of fuel and nitrogen for fertiliser and some drop in wheat prices would make bidders more discerning in the coming months, with interest increasingly focusing on high-quality properties in the county. Not even the effects of severe flooding over the last year has held up the price increases. Carter Jonas say that knowledge that farmland has been flooded may discourage some prospective bidders in flood risk areas but local knowledge of those who know the farm and production potential are less likely to be deterred than foreign investors.

Conversely, a well drained farm has actually benefited in the current market, says the company.

Alex James, who played bass in the chart-topping Britpop group Blur, moved his family to Oxfordshire. He now produces cheese on his dairy farm in the village of Kingham, backing campaigns calling for better prices for farmers producing higher welfare pig products.

But he believes the fact that some farmland is free of inheritance tax has added a further boost to demand for land.

He told the BBC: "Land is free of inheritance tax so wealthy people are buying land because basically they can transfer their assets to their beneficiary tax free. It's kind of like getting a lump sum when you die.

"It is not really what you want. You want people to buy land because they want to do something with it and use it. But it's all being packaged up and turned into tax-free death benefits."

Farmers across Oxfordshire are hoping the spell of dry weather will be enough for them to complete the harvest after what has been described as one of the worst summers they have to to deal with.

Wet weather has hampered the harvest around the county, with combine harvesters left idle and thousands of acres too wet to cut.

Sandra Nichols, senior policy advisor for the National Farmers' Union in the South East, said: "It's been a very challenging harvest for farmers, probably amongst one of the worst they have had to deal with. Farmers will be lucky to make any money this year."

The NFU stressed, however, that prices in the supermarket would not increase further despite fears that any wheat shortage could mean the cost of a loaf of bread goes up.