Agricultural land looks to be one of the safest asset classes for investors in the coming year after bucking the trend in 2008.
As the property market continues its decline and residential development land values plummet, agricultural has demonstrated its relative long term resilience to recessionary forces with five year growth at 135 per cent.
The fourth quarter of 2008 has seen average farmland values across Britain fall by -4.4%, though the extremely strong growth in the first half of the year has kept most areas well into positive territory year on year and with prices closely aligned to wheat which is expected to rise in 2009, analysts believe 2009 should see land values remain steady as other commercial prices continue to fall.
Prime dairy land topped the growth table, up 32.2 per cent year on year, with average quality arable land at the bottom of the table enjoying 15.9 per cent growth. On a quarterly basis, poor quality livestock land fell by 9.4 per cent but still ended the year 18.2 per cent up on 2007.
Philip Hoare, Associate in the Central England Farm Agency department at Savills, said: “On any other investment measure a growth of 15.9 per cent, particularly in this year of unprecedented volatility, would be a great performance. Our outlook for wheat, the main determinant in setting overall land values, is bullish for 2009. We therefore confidently expect that agricultural land will be well-placed to defy, in large part, the downward recessionary pressures.”
Savills forecasts that average values will remain stable though 2009, at worst softening slightly with a more positive outlook for the second half of the year. However, a two-tier market is expected to become more apparent, with the best market being for good quality, well-equipped land in a good location, especially good commercial arable land and the very best estates. Poor quality land, in poor locations, will be difficult to sell and will see the greatest downward pressure on values.
“Our research bears out our experience of achieving sales this year”, said Philip Hoare, “Judging by the number of buyers on our books, we remain confident that farm sales will buck the trend in 2009 as buyers see land as an increasingly safe haven.”
The impact of the recession is most likely to impact on demand from lifestyle buyers, with the outlook for traditional land owning buyers remaining positive. Lifestyle (non-farming) buyers accounted just under a quarter of all land purchases through 2008, down from a third in 2007, a trend which is expected to continue into 2009, as these buyers feel the full impact of the broader economic situation.
By contrast, investment buyers accounted for 24 per cent of all deals in 2008, up from 16 per cent in 2007.