27 April 2015 | Online since 2003



3 June 2014|News,Property News

Rural property continues to generate impressive gains in 2013


Andrews Fallows

Rural property continued to generate impressive returns for investors in 2013, according to the results of the IPD Rural Property Index for the year ending 31 December 2013.

Over the year to end 2013 rural property returned 12.3%. This sector has performed well throughout the recession, producing a 10.9% total return during the last five years, and reinforcing its reputation as a valuable sector to have in a portfolio.

Most of the return is generated by rising values (10.7%). Although the income, which is mainly in the form of rents paid by farmers to use the land, is small (1.4% of capital value), the rents are rising due to it being a profitable period for farming.


There has been a considerable increase in activity in the investment market this year with purchasers chasing quality holdings.

Mark Weedon, Vice President, IPD, commented: “These index results show how well rural holdings have performed compared with other asset classes. This type of investment offers great diversification options against more mainstream assets.”


Richard Liddiard, Head of Farm Agency at Carter Jonas, said: “Just as we are seeing in the main farmland market for farms without sitting tenants, there is increasing price differentiation for quality, where investors are seeking large good quality arable holdings that offer the best opportunities for long-term rental and capital growth. Investors seem much more optimistic about the arable sector’s profitability, possibly reflecting the higher commodity prices and better ability to control costs. Investors therefore appear to be being driven by asset performance fundamentals and not just seeing the investment market as a cheaper form of tax vehicle.”

As a result, there has been a considerable drop in yields, especially on arable investments over the year. There has also been much more interest and activity from new private purchasers coming into the market.

They have primarily been seeking arable units, on fully repairing terms to reduce risks from repair surprises. Furthermore, since these are easier to manage, they can be controlled from a great distance away and thus appeal to a much wider range of purchasers.

The fall in yields has not happened for all farm types, with more marginal, lower quality land investments struggling to sell, to such an extent that there is almost a 50% difference in yields between the best and worst.

Another factor in the market is rising farm rents. For a number of years, the higher rents being agreed for new open market lettings have been dismissed as possibly a blip. However, there is a growing realisation that this rise is more long-term and that the difference in rental value between Agricultural Holdings Act and Farm Business Tenancies had become unrealistic. We are therefore starting to see rents on investment farms, with Agricultural Holdings Act tenancies, rising by significant percentages, although many landlords and tenants are phasing in this market evidence over several rent review cycles. The effect is rising investment capital values due to both expected rent reviews and agreed rents; again, this is much more of a factor for the arable units than livestock units, reflecting the sectors’ profitability.

Andrew Fallows, York-based partner responsible for estate management for the national property consultancy, commented: “The sector continues to be of interest to private and institutional investors looking for a secure asset class with the fiscal benefits that land ownership brings. We continue to see demand from those that are aware of the increased profitability within the sector and the reform of the Common Agricultural Policy.

“The underlying principles of supply and demand have meant that farmland values continue to grow and this shows little sign of abating. Investment farms are increasingly sought after and this has been borne out by sales both on and off market during the last 12 months.”

Download




Comments


04-06-2014 10:20 AM | Posted by: Tom Gibbs
It looks like rural property and farmland is still doing well, check this out https://www.smithsgore.co.uk/news/pressrelease/2Q_Mid a good year for farmland I think

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


20 April 2015
Offshore Wind Geotechnical Design Engineer
You will also be focusing on a large offshore wind farm and be for managing and delivering technical assessments and calculat...

20 April 2015
Team Leader – Global Forests and Sustainable Land Use Programme
A Bachelor’s degree in social sciences, business, finance, politics, agriculture, forestry, environmental management or other...

4 April 2015
AREA SALES MANAGER - EQUINE / HORSE CARE PRODUCTS - SOUTH WEST INCLUDING THE CHANNEL ISLANDS
JP Trett is a specialist recruitment business, we are specialists…specialists in agriculture and rural business....

6 April 2015
Senior Account Executive Role-Top Financial PR Agency!
They work with an exciting mix of clients ranging from sectors such as renewable energy and natural resources, to agriculture...

7 April 2015
Sales Co-Ordinator
Kent's major visitor attraction and events venue, is now seeking a full-time Sales Co-Ordinator to work in the Head Office at...



Top stories you may have missed
10 April 2015 | Agri Safety

The permanent eradication of Bovine Viral Diarrhoea [BVD] in Scottish cattl...


10 April 2015 | Dairy

The abolition of milk quotas in Europe on 1st April has resulted in a numbe...


10 April 2015 | Cattle

The top 14 milk producing countries in Europe will increase their productio...


10 April 2015 | News

Matt Ware is the NFU's head of government and parliamentary affairs, based ...


10 April 2015 | Arable

There is a 'desperate need' to improve farmgate returns given low incomes a...


9 April 2015 | Arable

Rapid stem extension, after a slow start to spring, is likely to create spl...


9 April 2015 | Finance

The time has come for landlords to expect to see reductions in farm rents, ...


8 April 2015 | Cattle

Cogent’s reputation as a source of the highest calibre sires has been enhan...


8 April 2015 | Arable

The spread of exotic and aggressive strains of a plant fungus is presenting...


7 April 2015 | Animal Health

The FSA’s new Food Crime Unit wants the industry to share information, some...