Global farmland market: Scale at fair price tempts UK buyers

UK farmers have long been interested in international land opportunities where they can access new markets and expand their enterprises at a lower price.

Spreading the business to a far-flung locale comes with its pros and cons, specific to the chosen country, and can either lead to a total relocation or management from afar.

With various elements of administration and infrastructure largely different to the UK scene, farmers considering this option should seek professional advice from the outset.

See also: Why you should consider selling land and property at auction

Comparing criteria

Clive Hopkins, Knight Frank partner and head of farms and estates, said UK investors have historically had a strong interest in Europe, primarily Spain, Portugal, Belgium, Holland and Denmark.

“Given Brexit, and the uncertainty of what relationships we might have with the EU going forward, there has been a slight pause on European investment,” he says.

“Many UK investors aim to grow their produce internationally and sell it directly into that country’s market – rather than relying on the import/export relationship between the UK and EU.

“Belgium, Holland and Denmark are desirable for those looking for intensity of agriculture, and Spain is more for those looking for scale and the right climate for an intensive crop.”

Central and eastern European countries offer scale at a lower price than in the UK but the management criteria and infrastructure is different, with these farms needing a more hands-on operation and intense management to make it work, says Mr Hopkins.

In central America, intensive high value return crops such as avocados are attractive in comparison – approaching 25% returns, far ahead of the UK’s usual 2%.

Scale is important with markets in Australia. “When I was marketing a beef portfolio sale, there were a number of UK investors interested,” says Mr Hopkins.

“They were looking for large scale good returns from an agricultural investment. Unlike those looking at European farms, who can manage from an arms-length, they were planning to move to Australia to manage the portfolio.”

Expansion opportunities

Adam Oliver, Brown & Co partner, said UK buyers are generally interested in farms overseas when seeking good investments or expansion opportunities, especially when expansion has proved difficult or impossible at home.

“More recently there has been interest coming from farmers wanting to diversify risk, given Brexit and land prices, plus fundamental support change being on the way in the UK,” Mr Oliver says.

“Farmers are rarely seeking to move there, but to have it managed locally or let out.”

Proper professional advice is key to avoiding any pitfalls, he says, from someone who understands elements such as local market dynamics, administration and taxes.

The regulatory requirements of many markets are slowly increasing, meaning investors need to fully understand local statutory requirements. Proper planning, including exit strategies, is key at the beginning of any investment.     

Pros and cons of the markets most UK buyers focus on

 

Pros

Cons

US

Developed, stable, secure, and sophisticated market with pure relationship between income earning ability and land values.

Not all states allow foreign ownership. 

Complicated tax structures.

Canada

Relatively low land prices, stable and secure market.

Limited provinces allow foreign ownership.

Australia/New Zealand

Range of land types/enterprises.  Developed market and, in some cases, strong returns.

Distance. Scale required.  Climate.

Poland

Developed, stable market with considerable government/EU support. Easy to access and strong macroeconomic growth.

Land prices have risen very considerably over the past 20 years.

Romania

Lowest land values inside the EU. Strong macroeconomic growth and potential for land appreciation is greater than other markets.

Relatively early stage development.

Source: Adam Oliver, Brown & Co

What’s coming to the market with Brown & Co this autumn?

Romania (1,483 acres)

This holding comprises a renovated residential property and 1,483 acres in the South West. As is normal in Romania, there is a mixture of freehold (124 acres) and leasehold (1,359 acres) land.

The annual rent equates to just under 1t/ha of wheat, paid either in cash or in wheat.

Field in Romania

© Brown & Co

Crops grown include wheat, barley, sunflower and oilseed rape, and the soil type is predominantly black cernozium.

As a tenant, there is a right of pre-emption to buy out the land, in the situation where the landowner wishes to sell.

The business will be guided at £1m, not including machinery and work in progress.

Romania (2,224 acres)

This includes 2,471 acres – 247 acres freehold and 2,224 acres leasehold – with a range of grain storage and drying buildings east of Bucharest.

The farm receives support payments for 1,483 acres being part of an environmental scheme for migrating birds.

Farm building in Romania

© Brown & Co

Cropping includes wheat, barley, sunflower and oilseed rape, and the soil type is silty loam. 

The business is guided at £3.15m to include machinery, equipment and work in progress. The owner is happy to assist any new owners for one year post takeover.

Poland (1,223 acres)

South of Gdansk, where land rarely changes hands, this high-quality commercial farm includes 1,223 acres of silty loam soil, which currently grows oilseed rape, winter wheat, spring wheat and sugar beet.

Farmland

© Brown & Co

It includes grain drying and storage facilities, plus some general agricultural buildings and machinery. Though there is no residential property on site, there is an office.

The property will be guided at £6,200/acre.

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