International Farmland Values
Savills latest international farmland market research reveals strong values and attractive returns on investment. It anticipates that as global demand for food increases, values worldwide will continue rising, as this increased demand will be met with a shrink in production.
Agricultural land is increasingly coveted by the financial sector, governments and private investors. This has helped sustain worldwide values, although the recession has slowed growth in some countries, especially where fast growth rates were recorded between 2005 and 2008 such as in parts of Western Europe.
UK values have shown the most consistent growth in Europe since 2007. Trends have been generally positive across Central and Eastern European countries where they have benefited from accession into the EU and the introduction of CAP subsidies. We expect further growth in values in these areas.
Global values are being influenced by concerns over food security and pressure on land from urbanisation and the demand for bio-fuels. Returns will vary in absolute terms and the degree of volatility will depend on a number of factors. These include whether a farmland investor has elected either to participate in the business of farming with its higher returns/risk profile, or take the more stable returns of cash rents as a landlord.
Where buyers invest depends on their investment aims, but a portfolio spread geographically wide diversifies risk. Developed markets are safest if you are seeking purely to preserve wealth. These include Western Europe, the USA, Canada, Australia and New Zealand.
However, higher returns, but also higher risk, are possible in emerging or frontier markets, where entry is cheaper or where agricultural production is underperforming. Such markets provide opportunities to capitalise on increasing income by injecting funds and skilled management. Opportunities in emerging markets exist in parts of CEE and South America; frontier markets include sub-Saharan Africa.