THE price of farmland continues to rise as demand outstrips supply - but there is still uncertainty among farmers.

The rural land survey, published last week by the Royal Institution of Chartered Surveyors, said prices for the second quarter of 2004 rose by 16pc on the same period last year.

It also said farmland prices averaged £8,630 a hectare in the 12 months to the second quarter of the year, the highest level ever recorded.

The lack of land coming on to the market, owing to uncertainty caused by the review of the Common Agricultural Policy, has exacerbated the position.

Demand for commercial farmland between April and June increased at the fastest rate since the RICS survey began in 1999. Demand for land with a house also increased, although at a slower pace than the first quarter.

"Demand and prices paid have increased sharply since February against a very small increase in supply; this may tempt other parcels of land on to the market in the short term," said Christopher Orme of Strutt and Parker in Harrogate.

Demand is also strong in the York area. Andrew Black of FPD Savills said: "At last there is increasing activity, with strong demand for farms. There is frustration at the continuing difficulties with transferring entitlements."

Andrew Purkiss of Mouchel in Northallerton said: "Recent sales appear to show a strengthening of the market; only time will tell if this is the case or whether recent sales simply reflect a release of pent-up demand."

In the Yorkshire and Humber region, the split between farmer buyers and non-farming buyers swung back towards farmers. After an equal split in the last quarter, farming buyers were more active, accounting for 73pc of land sold.

Nationally, the balance remains fairly equal, as non-farmers continue to play an active role in the farmland market.

The volume of sales reported in the second quarter was 23pc down on the same time last year, but 7pc up on the first quarter of this year, on a seasonally adjusted basis.

Surveyors remain confident in their outlook for both commercial farmland and farmland with residential buildings.

Julian Sayers, RICS rural spokesman and chartered surveyor, believes some farmers are holding back from putting their property on the market until the final implications of the single farm payment regime are known.

"As we start to see growing certainty regarding the outcome of the CAP mid-term review, farmers should be encouraged to bring their land to the market if they wish to sell," he said.