CAP reform update December 2013

Extending your portfolio overseas – opportunities for significant returns?

Our latest International Farmland Focus shows that farmland values across the world continue to grow and farmland remains a top performing asset, with just over 20% average annual global growth since 2002.

 

Savills Research has just launched its latest International Farmland Focus.

Across the world farmland values continue to grow and farmland remains a top performing asset. Our Global Farmland Index shows an average global annualised growth since 2002 of just over 20% - with the highest growth recorded in the emerging markets.

Many investors are seeking to de-risk portfolios leading to a wholesale re-evaluation of asset classes in an attempt to identify real and sustainable values. This drive towards safer investment is clearly illustrated by the substantial interest shown in the prime central London residential market , which continues to attract interest from around the globe, the GB farmland market and of course the forestry sector. 

The proof is in the numbers over the past 10 years, average values in the prime central London residential market have increased by 135%, GB  farmland by 270% and the UPM Tilhill/Savills Forestry Index has risen by almost 325%.

At the same time the rule book of financial ‘norms’ has in part been rewritten with an understanding by investors, Governments and not least the media of the fundamentals and value of prime assets such as agriculture and forestry.  This has been motivated, as we all know, by a global acknowledgement of the need for sovereign food and energy security driven by population growth and climate change.  All of this is assisted, of course, hugely by the accessibility of global markets, together with the ability to move management skills and technical knowledge, as well as capital, to what are effectively under developed areas. 

Therefore, extending a portfolio into farmland across the world provides access to land and an opportunity for substantial capital growth. As is always the case, the rewards depend on the appetite for risk and an awareness of historical trends, the choice of the right location and the right agribusiness operator can ameliorate these risks.

Knowledge is crucial

Agriculture is a complex industry where investment is generally medium to long term. Achieving top performance of the farming operation and adding value along the supply chain is key to maximising investment returns.

The global farmland markets are an active and diverse marketplace  – we are involved in transactions for farms that grow rice to others with substantial livestock enterprises. We are also actively involved on an advisory level including advising private and corporate investors on all aspects from the agribusiness operations to valuations for audit and funding purposes.

To the overseas buyer looking to buy agricultural land overseas, knowledge and understanding of agriculture, the restrictions and policy on foreign land ownership and investment is crucial as the regulatory environment is not only complex but varies by country. These factors will determine both the entry and exit strategy. To read the full report  – click here.

Savills Agribusiness and International Rural teams have a track record of advising private and corporate investors in selecting and managing farming opportunities. In addition, our expertise extends to strategic advice to Governments.

 
 

Key contacts

Peter Bennett

Peter Bennett

Director
Food & Farming

Savills Cambridge

+44 (0) 1223 347 221

+44 (0) 1223 347 221