The lush green fields of the West are set to increase in value so much in the next four years that they are a better investment for the rich than gold, oil or an apartment in Mayfair.
That is the conclusion of research by leading economists who said that the value of farmland – even if it is not on the edge of a town and has no chance of being sold for development – was set to rise by 37 per cent by 2016.
And that return beats all the forecasts of growth for gold, traditionally the safe harbour for the world’s millionaires in troubled times, oil, property and even ten-year Government bonds. But West farming leaders say the ‘land rush’ will make it harder for younger farmers to get into the industry.
The study of data compiled by Oxford Economics and the research arm of property consultancy Savills discovered that because of a number of factors, the value of land – particularly in the fertile soil of the West – was set to rise by more than a third in just three-and-a-half years – faster than any other class of real estate in Europe.
It is driven by growth in the global demand for food, as well as shielding wealth and a means to pay less tax.
Savills director Alex Lawson said that because the world will need an extra billion tonnes of cereal production and 200 million more tonnes of livestock products by 2050, there will be long-term profitability in agriculture.
“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,” he said. “Combined with that there are income tax, capital gains tax and inheritance tax advantages to putting your money in farmland.”
Farmland will even outshine offices in London's West End, where prices are kept high by companies such as hedge funds and technology firms competing to rent a limited supply of space.
“UK farmland will be the top-performing real estate in Europe and potentially the world,” said Ian Bailey, Savills’ head of rural research. “Supply is tight and demand is especially strong for arable crops.”
So this demand has seen an increase in City investment in farmland – billions of pounds of pension fund money invested in the world’s farmland is set to double by 2015.
“The British farmland market is the most transparent and liquid in Europe, creating levels of interest from investors and institutions which, combined with a limited supply, will fuel the price growth,” Mr Bailey said.
Ian Johnson, south west spokesman for the National Farmers’ Union, said farmers would give a wry smile to the report, but the issue was serious for younger farmers. It is good news for established farmers with land who have tangible assets they will hopefully be able to borrow against to invest in their business.
“But the problem is that when the price of land goes up like this, the amount needed to borrow to buy it is far more than one would ever make from farming it in the same year. So effectively, the only people who can buy land are the ones doing so as an investment, with no interest in farming it themselves.
“There is a serious problem for the younger generations wanting to get into farming, and shows the value of things like County Farms and share farms, which give the younger generation the opportunity to get into farming,” he added.
“To maintain the level of food production in this country, we’re going to need another 60,000 people to come into farming in the next ten years, and if the price of land is soaring they are going to find that difficult.”