11 January 2023

Farmland: an investment for the ages

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“There’ll always be an England, while there’s a country lane. Wherever there’s a cottage small, beside a field of grain.”

The British countryside continues to exert a strong magnetic pull. The combined forces of atavism and nostalgia make the notion of spending one’s days in some rural idyll powerfully attractive to many. The wealthy aren’t immune to these feelings, of course. But for them, the countryside’s appeal is also highly future facing. It’s a means of protecting and preserving wealth for the generations to come.

Fertile soil

Over the last 20 years, farmland has proved an excellent investment. The value of arable has nearly quadrupled, with average prices now sitting at £10,000 per acre. Forestry has seen prices spike by as much as 60% since 2020. As a result, demand has spilled over into lower quality livestock land and driven the cost of pasture up to record levels. 

Much of this growth is down to the arrival of the big institutions. As they rush to burnish their green credentials, it seems no price is too high. It might be premature to talk about a bubble, but there’s certainly some serious head-scratching going on amongst professional valuers. Their appetite appears insatiable. A London based buyer recently expressed interest in a parcel of farmland, only to discover they were ninth in the queue. Standing in front of them were eight different institutions.

A highly desirable commodity

The fact is: there’s a lot of money chasing very limited supply. 

Typically, just 100,000 acres of farmland are publicly marketed in England and Wales each year. Whilst this conceals the fact that – as in every other property class – more and more is being sold off-market, the total is still well short of the 400,000 acres a year available during the 1980’s.

Such farmland as does appear is being snapped up quickly. And it’s not just the institutions who are buying it.

Farming is now a game of scale. More land means more efficiency, crucial at a time when commodity prices are either depressed or fluctuating unpredictably. Buying neighbouring land is the easiest way to leverage economies of scale and these opportunities don’t come around too often, so when they do, farmers will compete strongly.

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