Who's Buying Britain's Farmland?

Twenty-twelve could be considered something of a landmark year for agriculture; the price of farmland has escalated to such an extent that some commentators have hailed it ‘a better investment than a Mayfair apartment’.

In actual fact, the price is said to have trebled over the last decade to an average of £8,900 per acre – which might be some welcome good news for those in farming.

With the value of land increasing so much, farmers ought to make doubly sure that their own fields, sheds and farm buildings are adequately protected by comprehensive farm insurance policies, as should any new land owners – of whom there are a lot. As a consequence of rising farmland values and the advantages associated with owning it, British farmland has caught the attention of many foreign investors.

Yet with a shortage of farmland entering the market (one agent estimates just 100,000 acres will change hands in the South West this year), who exactly is buying our farmland and more to the point, why?

Who are the new buyers?

According to estate agents, the majority of sales are made between British farmers; however many have seen an influx of City bankers and investors from foreign climes making enquiries. Most notably are prospective buyers from Italy and Greece (surprising, given the effects of the Euro crisis) – plus investors from India and China.

There appears to be a split between investors who hope to simply cash in on land values by selling in the not-too-distant future and ‘lifestyle’ buyers who want to ‘procure social status’. Owning a piece of England is considered very desirable in China, for example and sales are highest in the south west of England.

Why are they buying British farmland?

Not only has the value of British farmland trebled over the last ten years, but industry experts expect it to increase by a further third during the next five years. Therefore it’s fair to say that farmland could be considered a lucrative investment right now. Some dismiss it as simply the ‘movement of capital between countries’, but others have emphasised the real benefits to owning British farmland.

Like gold, farmland is deemed a ‘safe-haven’ asset class but with added bonuses, as it offers returns of two – three per cent per annum, if not more due to the rising price of commodities. What’s more, the government applies tax breaks to this sort of land and exempts it from inheritance tax – provided the land is used as a farm.

How are they managing it?

Excluding British farmers, some 30 per cent of the new buyers will not be based on the farm itself. Many live in the city, where they work all week or are situated overseas. In order to maintain the farmland, they will hire a local farmer to manage the acres on their behalf. With any luck, their experienced farm manager will be aware of the requirement for reputable insurance – particularly if the land is left unoccupied at times.

Clearly, foreign investors are injecting much needed funds into the economy, but the debate rages on about the lack of available land for those that genuinely need it for their livelihood. However, it’s unlikely this trend will change in the short-term, if predictions about land values come to fruition.