Farmland as an alternative investment is a relatively “untapped” market at present.
Why is this? Well investing in farmland often means that you will have to be of a high net worth so unless you can scrape together a few million pounds it is… I’m afraid to say out of most individuals reach.
This is because farmland is currently selling at around £5,000 per acre. This doesn’t sound too bad but farms are normally sold in massive lot sizes.
Why would you want to invest in farmland?
Firstly let’s look at what the prices of agricultural farmland are governed by:
The cumulative result of this has been values increasing by 15% year upon year.
Farmland is something which every human being needs to live. In its purest form it provides us with a means to grow food and rear cattle therefore providing the means to eat for the whole population.
A quote from H.R.H Prince Charles recently in the Richard Dimbleby lecture read “That which sustains us must itself, also be sustained” This means that the whole ecosystem of this world needs to be restored at the same or at a faster rate than it is diminished. The Amazonian rainforest alone releases 50 billion tonnes of water vapour into the atmosphere every day! This makes our climate cool and makes this planet inhabitable. Deforestation is currently operating at a rate of; the size of a football pitch every 4 seconds! One of the great problems with deforestation is the rate at which it impacts on our environment. Not only does all of the CO2 sunk by the trees get released into the atmosphere when they are burnt. But there are now less natural CO2 sinkers in the environment and when trees are not sinking CO2, they are not producing oxygen, the very air we breathe.
Our reliance upon nature’s non-renewable resources is 25% greater than nature can self sustain. Fossil fuels such as coal, petroleum and natural gas are being used at too fast a rate. The sustainability of these fossil fuels is something which is being tackled by the Kyoto Protocol.
The Kyoto Protocol is an obligation made by all countries to cut their use of non renewable resources by 80% by 2050. Here is where we can come back to farmland and the growing market that is renewable crops and the land underpinning it. As Power stations throughout the UK start to follow the trend and invest heavily in harnessing the power of renewable resources, this may well drive up the prices of green energy crops such as Miscanthus grass which is a co-burner to be used with coal in the production of electricity. Now this may well increase your annual yield through higher revenues, but with this, the land itself should increase in value as it is now worth more to the investor.
So let’s recap
– The price of farmland is steadily increasing as demand increases and supply decreases.
– Farmland value has increased on average by 15% year on year.
– It is a diminishing resource that needs to be sustained.
– It will help the UK contribute to their Kyoto protocol obligations.
– More and more people are starting to see the benefits of being “Armchair Farmers”.
– There is around £11 billion of borrowing secured on assets worth over £170 billion, excluding stocks and growing crops.
– It is the foundation of the built environment!
Remember the secret to success is to balance your portfolio. Where better than UK farmland?Back to news