Friday, February 15, 2008

Should you be buying into farmland?

The most recession-proof asset class

Higher food prices are encouraging farms to expand, pushing the price of UK farmland to new highs. And that has fuelled pure investment demand - but is the land itself the best way to take advantage?

Posted by mary @ 11:18 AM (1850 views)
Please complete the required fields.



7 thoughts on “Should you be buying into farmland?

  • mark wadsworth says:

    About half of agricultural land values derive from the income you get from agricultural subsidies, if we scrapped that (and I believe that we should!!), you’d lose half your capital value overnight.

    Reply
    Please complete the required fields.



  • There is lots more to it than it seems, agricultural land is not subject to inheritance tax, so lots of older people with cash for the kiddies are buying it up to pass it on.

    Reply
    Please complete the required fields.



  • Land is only really worth as much as the value of solar energy that can be captured on it, whether that be energy from food crops or biomass. It may well be overpriced now, but if the peak oil doom mongers are correct, then agricultural land may well become extremely valuable.

    Reply
    Please complete the required fields.



  • UK farmland is desirable for several reasons: the commodity boom (grain prices), the value of the farmhouse that often comes with the land, the development potential if you can get planning permission, and of course the lack of inheritance tax. I don’t know much about the financial yield of farmland so I can’t say whether UK farmland is overvalued yet, so there might still be some way left to run. On the other hand, the credit crunch takes away some of the support for farmland.

    Globally, farmland is booming because of the commodity boom. Compared to other countries, UK farmland isn’t particularly desirable. As RickyB points out, for greater agricultural yields you’d be better-off buying land somewhere with lots of sunshine. Many Brits tried that in Zimbabwe, but it didn’t work out too well. Kenya might be viable, if the current political situation resolves itself. I read recently that Botswana was looking up. Closer to home, France is probably your best bet – it’s nearby, it has a long history of farming, it’s politically stable, and it has a long history of throwing piles of cash at its farmers. MoneyWeek (always ahead of the game) had an article about investing in farmland, MoneyWeek: Buy a farm – or agricultural stocks.

    Reply
    Please complete the required fields.



  • Brazil. Land is plentiful and so is sunshine. Boom might have already run too far though.

    Reply
    Please complete the required fields.



  • Russian farmland could be very profitable. It is highly productive and the lands are vast. You would have to form a Russian company first however as they don’t let foreign investors own farmland yet. Might be a bit scary though. Personally, i think farmland is a good investment for the reasons described by drewster.

    One thing that can out perform farmland and has outperformed farmland is forest land. This is often overlooked and i don’t know why. It is free from inheritance tax, income tax and capital gains tax in the UK (i seem to remember). Wood is always in demand and rising in value. It supports wildlife and their is future potential to develop revenue streams from carbon credits. It is undervalued at the moment IMO. I only look at soft wood but hard wood is growing in popularity and has real growth potential in the form of controlled plantations. You have to invest in South America and Africa for that and that isn’t my thing but their is a real need to look at how we can protect old growth hardwood forests (lungs of the earth not to mention biodiversity) while harvesting hardwood. Only way to do this is grow controlled plantations on land that was once used for cattle farming (one of the most destructive things i have seen) or some thing like that. Currently their is a supply bottle neck. May have missed the boat on that one though.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>