While much of the focus over the last decade has been upon the UK housing market, and also to a lesser extent the commercial market, it seems that many investors have missed the boat on another area of the UK property market. UK farmland has shown an incredible increase in value over the last decade and, would you believe it, has actually outstripped growth in the value of the London prime property market!
So, what is pushing the value of UK farmland? Will this continue for the foreseeable future? Is this attracting the attention of overseas investors looking to invest in the UK?
Growing demand for UK farmland
The value of UK farmland per hectare has grown by 270% over the last decade and now stands at £15,415. This is a phenomenal increase especially when you bear in mind that the UK farmland sector is not one which registers on the international investor raider and indeed many people are perhaps unaware of how much farmland changes hands. There are a number of reasons why UK farmland is becoming more popular and why many experts believe that demand will continue to grow, with prices following, for the foreseeable future.
Quote from PropertyForum.com : “The UK property market is in effect two very separate markets with London and the rest of the UK often showing different levels of performance. We would be very interested to learn your opinion of the UK market at the moment and the prospects for the medium to long term.”
Some of the main factors which have accounted for growth in the value of UK farmland are an increase in demand for food around the world, climate change and indeed liberal landownership regulations in the UK. When you also bear in mind the fact that the UK is to all intents and purposes a relatively small island with limited land available, and a growing population, what really stands in the way of further growth in the short, medium and longer term?
Green policies out of the window
The fact is that many overseas investors are now looking towards the UK farmland market as a means of “parking” investment funding for the future. In many ways while they are directly investing in UK farmland there are also directly investing in “corporate UK” which continues to attract significant interest. Even though the UK has a very close relationship with Europe and the European Union, indeed it has been an integral part for many years now, it is easy to forget that the UK refused to take on the euro and is now benefiting.
In years gone by farmers were supported more heavily by the European Union although over the last few years funding has become a little more difficult to obtain. The balance between high yielding farmland from a farming point of view and the potential capital released from selling to developers is changing. More and more farmers in the UK are now looking to at least sell part of their often large land portfolios as a means of subsidising their farming operations in the longer term. Indeed, some farmers are now tempted to call it a day and maximise their return from land they hold.
In many ways the UK farmland market has sneaked under the radar of many investors but that is now changing. Domestic and overseas investors are looking towards the UK farmland market as a long-term investment, they believe that demand will only grow and prices will continue to rise. It will be interesting to see whether the UK government continues its soft approach to re-designating farmland for commercial use or whether indeed those supporting “green issues” put more pressure on the authorities in the short, medium and longer term.