Download farmland prices blog oct 2014

In The Economist (14th October, 2014), there is an insightful article showcasing how
farmland prices are outperforming prime London property. The article entitled, 'Raking it in',
explains how, over the last decade, farmland prices have grown at twice the rate of prime
London property prices with 'good agricultural land increasing 270% in value compared with
a 135% rise for London houses during that time, according to Savills.'
This is three times the price of agricultural land in America and 15 times the cost of such land
in Australia.
This is further supported by Mark McAndrew, Partner at Strutt and Parker, who yesterday,
speaking at a seminar in Oxford, explained that farmland has increased in value due to
various reasons including the following;
1) Lack of supply;
2) It is a safe investment with sustained capital growth;
3) The population continues to increase with a continuing need for food security;
4) 'The investor'. These may be individuals, financial institutions or sovereign wealth funds.
They are from the UK, Europe, the Middle East and Asia. They may be tax-led purchasers
but what is very clear is that agricultural land is being viewed as a safe-haven asset.
So, what will happen to land prices moving forward?
In The Economist article, Savills suggest that the bubble will not burst because the supply of
farmland shrinks each year. They go on to say that it may slow as production increases and
commodity prices start to dip. McAndrew, Strutt & Parker, implied that he felt there may be a
pause but this will depend on the prices of cereals which will hopefully get better, but will be
volatile. However, he ultimately feels that land prices will continue to increase.