British farmland prices rising faster than prime London property
The value of British farmland has outperformed most other assets over the past decade, with a 270pc growth
Dry-stone walled field near Castletown, Dark Peak, The Peak District, Derbyshire
British farmland prices have increased by 270pc over the ten years to 2012 Photo: ALAMY
By Olivia Goldhill
Britain's farmers - not Mayfair property speculators - were the big financial winners of the last decade with new research showing the value of their land almost quadrupling.
Rising global food demand, climate change and foreign investment attracted by liberal British land ownership laws have helped to make a hectare of British farmland bought in 2002 one of the best performing investments in the country, according to new research from Savills.
Up to 2012, good agricultural land in the UK had grown 270pc in value from 10 years earlier to $25,575 (£15,415), outstripping gains in prime central London, which rose by 135pc over the same period, according to Savills.
<noframes>Interactive chart: Average farmland values in 2012</noframes>
“The general view is that growth is going to continue in the UK, though values are very high and how long it can be sustained is unclear," said James Cairns, from Savills international land markets.
Britain's green pastures are worth three times the price of a hectare of farmland in the US and more than 15 times the cost of an equivalent paddock in Australia, two of the world's largest food producers.
The high retained value of farmland in the UK has also attracted the interest of large sovereign wealth funds seeking a secure investment in which to park their capital, according to Savills.
“The UK is seen as a stronghold of capital preservation and if they can put their wealth into a UK farm, that’s very interesting to them”, said Mr Cairns.
However, British farmland - which has delivered an annual 14pc growth rate - is still behind the average global trend. International farmland values - based on 15 key markets - have increased by an average 20pc, according to Savills.
Demand overseas is being driven by climate change and rising demand for food from Asia's rapidly growing emerging economies.
“If climate change is having an impact on production in places like Australia and America and harvests are affected by flooding or drought, then worldwide supplies are affected, which means it’s more important to develop farming activity in new areas like the emerging markets”, said Mr Cairns.
The highest growth rates are in countries such as Romania, Hungary, Poland, Zambia, Mozambique and Brazil. Romanian farmland values grew by 40pc per year over the decade to 2012, double the global average and the fastest growth of any country since its accession to the EU.
“As a general rule, the emerging markets like Romania and Zambia are growing very quickly and looking at the next ten years, they’re going to be the countries I would expect to have the most growth, both in terms of income and capital”, said Mr Cairns.
<noframes>Interactive chart: Annual change in price of farmland 2012</noframes>
Overseas investment in UK arable land fell from 9pc in 2003 to 2pc in 2012, as overseas investors seek better value per acre on home soil.
But the UK is still seen as attractive to international buyers, as the UK and Ireland are the only entirely free markets for farmland out of those surveyed by Savills. Nearly every other country restricts foreign ownership of land.
Overseas buyers of British farmland enjoy liberal land ownership laws and business property relief, with the ability to pass down holdings to the next generation without incurring inheritance tax.
“Sovereign wealth funds in the Middle East and Asia are looking to acquire large funds and arable areas to grow food for their own food security. There’s investment interest from America, Europe, Australia," said Mr Cairn.
Hugh Coghill, director of land markets at Savills, said that although investment in global farmland markets was increasingly popular, predictions are uncertain as there’s little long term data on the area.
“Investment in global agriculture, and to a degree in global forestry, has only been on the agenda since about 2005. The markets of the world are immature”, he said.
Last year it was revealed that the cost of UK prime arable land rose by 10.7pc to £7,594 an acre in 2012, with growth of 40pc to £10,631 forecast by 2018.