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Investing in Farm land is considered a safe bet by many, and an effective inflation hedge by others, but what is it that has been driving the value of UK Farm Land up for the last 15 Years?
The simple answer to that question is supply and demand, as with any asset, when demand outstrips available supply the value of the asset grows, and those investors who have historically chosen Farmland Investment as a safe haven for their capital have beaten inflation for 15 years because not only is the supply of good quality farm land diminishing due to Urbanization, Climate Change and a bevy of other variables, but also the demand for food, livestock and biofuels from an increasingly larger population has increased every year, and so it will do until the Human Race ceases to expand.
Thus the gap between supply and demand has continued to grow, and the existing Farm Land has become more and more valuable, as it is the only resource we have to feed ourselves.
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Since the mid 1900’s population growth has occurred faster than cropland growth to an ever increasing extent. Between 1961 and 2000 the global population increased by 113.9%, and at the same time the total amount of farm land globally increased by a mere 10.2%. The amount of farm land per person on planet earth in 1961 was 0.42 hectares. In 2007 the per capita availability of farm land had halved to 0.21.
On a local level, there is little or no more farm land in the UK that could be bought into production, yet in the last few years we have dropped from a self-sufficient capability of 85% (we could feed 85% of our population with the amount of farm land we have, to just 70% in a very short period of time, mostly due to large increases in population.
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The UK population is due to expand from 62 million in 2010 to 77 million by 2050, further increasing the true value of good quality farm land. Investing in Farm Land, or Farm Land Investment, should be approached carefully, ensuring that the land purchased is productive, has been valued by a qualified agricultural Chartered Surveyor, and ideally is being worked by a tenant farmer, further increasing the potential return for those choosing Farm Land Investment as we get to capture income in the form of ground rent.
For more information on Farm Land Investment for the smaller investors click here.