The 2006 IPD Let Land Index (to Dec 2005) shows that the performance of let farms weakened in 2005, but still outperformed residential property. However, annualised over the last three and five years let land also gives a stronger return than commercial property.

The headline results are:

• For the year to December 2005 the total return for tenanted farmland was 9.4% compared with 18.5% in 2004.

• This is due to reduced growth in the capital values during the year. Capital values of tenanted farmland were 7% in 2005 compared with15.7% in 2004.

• The 10 year annualised return for Let Land was 13% at the end of 2005. This was substantially above the 10 year annualised returns on equities (7.9%) and gilts (7.7%).

• Income returns in 2005 fell slightly to 2.3%, still well below the long-term average of 4.1%. Mainly a function of the increase in capital values but also reflecting pressure on farm rents.

• The net disinvestment in tenanted farmland continues, with 4.9% of the investment assets held in the index sold during 2005. The transactions boosted capital growth by only 0.1%. This disinvestment reflects a continuing review of reversionary interests by investors.