Brooks Macdonald Funds warms to the farmland theme
Martin Robinson, chairman of Brooks Macdonald Funds says there is evidence to suggest UK farmland will continue to appreciate in value.
Warren Buffett has told investors in Berkshire Hathaway that he expects productive assets, like farmland, to outperform unproductive assets, like gold and government bonds, over the next century. We agree.
The outlook for long term growth in the capital value of farmland is compelling, and something which is underpinned by a broad range of demographic, economic and legislative trends.
On the one hand, an increasing world population coupled with growing demand in the emerging markets is accentuating global food security concerns and driving commodity and land prices ever higher. At the same time, commercial farming organisations are looking to drive efficiency and profits by consolidating land holdings into ‘super farms’, while in the UK specifically, recent and significant commitments to bio fuel will mean increased demand from the domestic market for farmland suitable for cereal crop production.
All of these factors point towards the market-wide expectation that demand for land in the UK will outstrip supply in 2012, meaning further upward pressure on farmland values, with some commentators expecting an increase of around 5% this year.
Recently, the UK’s Royal Institution of Chartered Surveyors (RICS) published its H2 2011 Rural Land Market Survey. The survey highlights the difference between the actual price paid for land in H2 2011 (£8,386 per acre) with their opinion based value of land (£6,514), a differential of £1,872 per acre, over 28%, up from 22% in H1 2011.