Farmland outperformed other asset classes in 2008, survey shows

Farmland outperformed many other investment assets in the past three years, according to research from Savills.

Investment gains of more than 20% in some cases meant capital growth was the primary reason behind nearly 30% of transaction in 2008, according to Savills Agricultural Land Market Survey (PDF). Asset performance was cited as the primary driver for acquisitions in 16% of cases in the previous year.

Coupled with this, the additional interest in land from investors helped push average arable land values up by 15.5% and pasture by 28.4%, mostly in the first half of 2008.

Savills’ head of research Ian Bailey said: “The period of exceptional growth in values appears to have stalled for the time being but historically farmland has remained fairly resilient to recession with any fall in values being limited.”

Savills expected average values for farmland to stabilise this year, regaining ground lost in the first six months later in the year, the firm said.

However, a two-tier market looked increasingly likely with the better-quality, well-equipped farms in more accessible locations stealing a march ahead of less desirable properties.

Overseas buyers would continue to me an important source of demand, with their market presence enhanced by the fall in the value of sterling against other currencies, said the report.