London/Reuters — Farmland values in Britain will rise 37 per cent by 2016, beating forecast growth for gold, oil, 10-year British government bonds and homes in London’s most exclusive neighbourhoods, according to data compiled by Oxford Economics and the research arm of property consultant Savills.
Savills director Alex Lawson cited the need for increased global food production to meet growing population and demand created by increased wealth in developing countries. “Combined with that there are income tax, capital gains tax and inheritance tax advantages to putting your money in farmland,” Lawson told Reuters, referring to the higher levels of tax relief for farmland owners. Farmland will even outshine offices in London’s West End district, where prices are kept high by companies like hedge funds and technology firms competing to rent a limited supply of space, the data showed.
Grain, a non-governmental organization that promotes the sustainable use of the world’s resources, last year estimated that between $5 billion and $15 billion of pension fund money was invested in global farmland, a figure it said would double by 2015.
The average value of British farmland has trebled over the past decade to about 6,000 pounds ($9,300) per acre, though prices of 10,000 pounds and upwards can be paid for larger tracts of land.
Last year, farmers buying land to expand accounted for 61 per cent of purchases. Savills director of residential research Yolande Barnes said wealthy individuals and institutions are attracted to farmland’s safe annual agricultural yields of about three to four per cent.
“There is nothing flashy about the income performance,” Lawson said. “But unlike an Icelandic bank, farmland is not going anywhere.”