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News News by industry Property and Construction Investors harvest impressive returns | Investors harvest impressive returns |
| Written by News Desk | |
| Friday, 29 February 2008 | |
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Investments in ‘in hand’ agricultural property have undergone a major transformation in terms of commodity prices and asset values in the last year, according to the latest Model Farm statistics published by the Rural Team of Carter Jonas in the Eastern Region.
The Carter Jonas Model Farm is a construct of the Carter Jonas rural research office to process the plethora of rural and farming statistics, including property. It is used by the firm to track and benchmark the performance of investments in agricultural property by comparison to other asset classes. In the year to 31 January 2008, the firm’s Model Farm – which includes 405 hectares (1000 acres) of land suitable for combinable crops, farm buildings, main farmhouse and a pair of cottages - has given a total return of 43.05 per cent which, Carter Jonas’s rural experts say, has outstripped virtually all similar asset classes and is little short of sensational in the current climate. The Model Farm’s achievements are set against investments in other markets including property and total returns, which include capital growth and income return. The Model is compared against retail property investments’ total return of (minus) -7.6 per cent, office investments with a total return of (minus) -3.0 per cent and industrial property with a (minus) -4.4 per cent return, based on figures produced by the Investment Property Databank to 31 December 2007. The Carter Jonas Model Farm also performs well in comparison with total returns in the same period for Equities of 5.3 per cent and Bonds which yielded 6.4 per cent. Carter Jonas confirms that interest from ‘lifestyle purchasers’ and overseas investors from Denmark and Ireland have contributed to the buoyancy of agricultural property values, in addition to UK farmers and business people who see the arable sector as a very sound business model. Carter Jonas began to mark overseas interest from these two Euro locations almost four years ago and continued Danish and Irish interest here is due to ‘better value’ agricultural land in comparison with land prices in their native countries. On the land front, Carter Jonas points to the lack of availability of good quality farmland coming to the market and says that land prices may well continue upwards for the forthcoming year or two. The 2007 harvest was not without its difficulties including not least weather conditions. However, the significant and welcome upturn in commodity prices has ensured that sound, well run arable farming operations have the opportunity to realise profits that have not been seen in the sector for the last decade. The ‘feel-good factor’ is definitely back in this sector and, hopefully, it is here to stay. Commodity futures are looking positive. There are expanding markets for bio-fuels, particularly in the US, and the appetite in Asia and the Far East for western foodstuffs and lifestyles contribute to commodity futures looking positive. Meantime agricultural land – either farmed ‘in hand’ or let on a Farm Business Tenancy - continues to enjoy positive Inheritance Tax (IHT) benefits. Andrew Watkin, a partner in the rural division of Carter Jonas, who is based in the firm’s Eastern Region, said: “What is clear is that those who have invested in the ‘in hand’ arable sector of agricultural property have seen their asset values increase dramatically over the last 12 months. “As a business model, commodity prices look positive for the 2008 harvest and, with a range of markets and consumers to supply, hopefully this trend will be maintained. “Arable farming has moved towards being seen as a more efficient, profitable and environmentally friendly sector of the economy. “Land is in finite supply, no more of it can be made and a wide range of investors, quite correctly, view.” |
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