LONDON — The price of British farms will rise higher than any other class of real estate in Europe over the next four years, driven by investors buying farmland to capitalise on growth in global demand for food and also to shield wealth and pay less tax.

Farmland values will rise 37% by 2016, beating forecast growth for gold, oil, ten-year British government bonds and homes in London’s most exclusive neighbourhoods, according to data compiled by Oxford Economics and the research arm of property consultant Savills.

The United Nations’ food agency has estimated that the world will need to boost cereals output by 1 billion tonnes and produce 200 million extra tonnes of livestock products a year by 2050 to feed a population projected at 9 billion people, up from 7 billion now.

And diets in developing countries increasingly include items common in the West such as bread and potatoes, which will further boost the value of British farmland where such crops are grown, Savills director Alex Lawson said.

“Combined with that there are income tax, capital gains tax and inheritance tax advantages to putting your money in farmland,” Lawson told Reuters, referring to the higher levels of tax relief for farmland owners.

Farmland will even outshine offices in London’s West End district, where prices are kept high by companies like hedge funds and technology firms competing to rent a limited supply of space, the data showed.

“UK farmland will be the top performing real estate in Europe and potentially the world,” Savills head of rural research Ian Bailey told Reuters. “Supply is tight and demand is especially strong for arable crops like wheat and rape.”

This scenario has increased investors’ focus on agricultural land globally as an asset class.

Grain, a non-governmental organisation that promotes the sustainable use of the world's resources, last year estimated that between $5 and $15 billion of pension fund money was invested in global farmland, a figure it said would double by 2015.

The average value of British farmland has trebled over the past decade to about 6,000 pounds ($9,300) per acre, though prices of 10,000 pounds and upwards can be paid for larger tracts of land and the high quality arable farms in east England. 

The British farmland market is the most transparent and liquid in Europe, creating stronger levels of interest than markets like France from private investors and institutions which, combined with a limited supply, will fuel the price growth, Bailey said.

British farmland has broadly tracked the price of gold over the last several decades as a safe haven investment and defensive hedge against inflation, though the price of gold is expected to fall by 2016, Oxford Economics said.

Ralf Oberbannscheidt, portfolio manager at DWS Invest Global Agribusiness, which has more than two billion euros under management, said UK farmland was a good investment but warned that widespread private ownership left investors open to taxation from the government should crop prices rise dramatically, as opposed to in countries where a lot of land belongs to the state.

“There might also be other more interesting pockets globally where farmland is relatively cheap because the yield can be doubled or tripled with better technology,” he said, noting investors might not be able to wring as much value from UK land due to the country’s greater use of technology.

Last year, farmers buying land to expand accounted for 61% of purchases. Savills director of residential research Yolande Barnes said wealthy individuals and institutions are attracted to farmland’s safe annual agricultural yields of about 3-4%.

“It is an obvious no-brainer choice for most pension funds,” she said, though limited supply can make it difficult for fund managers to buy a sufficient quantity to have an impact on the overall portfolio balance.

“There is nothing flash about the income performance,” Lawson said. “But unlike an Icelandic bank, farmland is not going anywhere.”

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Sat May 25 12:30:58 SAST 2013 ::

Jun 27, 2012

Papage

That is exectly what we need in SA, more land to grow nutritious food to feed ourselves, we need lots of ploughing equipments, we need man power to do this, please Government, invest in Food plantations we need this to aliviate hunger, we dont want Gold we need food, lots of Food.
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Jun 27, 2012

Masheleng

How about we prevent morons and imbeciles from breeding more of their type?
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Jun 27, 2012

Francis

A farm is only profitable with:
knowledge
hard work
cheap labour.

To find this in 2012 in South Africa is not an easy job.
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Jun 28, 2012

PleaseGetReal1

Masheleng
How about we prevent morons and imbeciles from breeding more of their type?

That is exactly what we need. People who can't afford food still breeds, WHY?


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Jun 28, 2012

Hail

I have been saying that all along! We can have them both the gold and the food. We can produce more enough to feed us and other countries so they will be buying from us. We have so much land than most of the other countries, Most province like NW, Limpopo and Eastern cape has lots of unused land. If each and every province will have more than 2 agriculture colleges then we will be in the right track. Imagine if all those who receive grant for free if they will be working in the farms producing food for the country and be paid in return then we will not be losing money for the baby makers for mahala. Hey our minister are just sitting in offices they not thinking nor exploring the country to see how much jobs can be created in agriculture.
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Jun 29, 2012

WarrenG

So be careful call for land without compensation...it'll be a fukkup like Zim...people on the land who are not skilled to produce from it. We need to be sure that whoever is on the farm land is utilizing it 100% maximum!
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