Could water security become the next differentiator in farmland value?

For generations, the quality and value of agricultural land has largely been judged by factors such as soil, drainage, access, location and productivity. But as weather patterns become less predictable and water availability comes under increasing pressure, water security could become an increasingly important factor in the desirability and value of farmland.

The issue is particularly relevant this summer, with almost three-quarters of England officially in drought following an exceptionally dry July. For farmers, the question is no longer simply “How much rain do we normally get?” but increasingly, “How secure is our water supply when rainfall is limited?”

Planning for the next drought

By the time drought conditions arrive, options for securing additional water can be limited. A more strategic approach is to consider how water can be captured and stored when it is available.

For some farms, this could mean an on-farm reservoir, increased rainwater harvesting, additional storage or improvements to existing irrigation infrastructure.

The principle is straightforward:

Capture water when it is plentiful → store it → use it when it is scarce.

The benefits can include greater certainty of irrigation supply, reduced exposure to abstraction restrictions, protection of crop yields and quality, and greater flexibility over cropping decisions.

However, the economics will vary significantly between farms. For a high-value horticultural business, reliable irrigation may be fundamental to production. For an extensive livestock farm, the investment case could look very different.

The more useful question for landowners is therefore not simply “What will a reservoir cost?” but “What additional productivity, resilience and marketability could it create?”

Could water influence farmland value?

Consider two farms with similar acreage, soil quality and buildings. One has an established reservoir, reliable infrastructure and appropriate abstraction rights, while the other is largely dependent on rainfall.

On paper, they may look similar. In practice, their productive potential and resilience could be very different.

This is where water could increasingly become a differentiator in the farmland market. Buyers may increasingly ask not only “What can this land produce?” but “What can this land reliably produce in a changing climate?”

Water infrastructure and availability could therefore become an increasingly important part of assessing a farm’s overall market appeal.

Look at water before you need it

Water storage is not simply a case of digging a reservoir. Planning, environmental and regulatory considerations need to be understood from the outset, while the source of the water is equally important. A reservoir does not automatically provide a secure water supply if there is no reliable or legally available source to fill it.

Farmers should therefore consider their current water position now: existing abstraction licences, boreholes, reservoirs, irrigation infrastructure and historical water use. They should also assess opportunities to improve storage, reduce water losses and investigate abstraction options well ahead of future periods of scarcity. There may even be grants available to assist.

A new consideration for landowners and buyers?

It is too early to say that water security will command a universal premium across the farmland market. Its importance will vary according to geography, soil, farming system, crop type and local water availability.

However, the direction of travel is clear. Water is becoming a business asset as well as an environmental consideration.

For landowners and prospective buyers, the question may increasingly become:

“How secure is the water, and what does that mean for the future productivity and value of this land?”

Contact your local Brown&Co office to find out about potential grants that could be available to assist.