Saturday, September 25, 2021

Property Vs Farmland – What Is The Better Investment?

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For years the choice has been simple.  If you want a solid long term investment, always choose property. However, in the last ten years, investors in farmland have seen a promising return on their investment.  Paramount investment company in London have highlighted that land in England is scarce and this is what makes it so valuable – whether it is a three bedroom house in London or a few acres in the suburbs.  Interestingly, for the first time in 20 years, it is more profitable to purchase prime arable land than a property in London.  Ten years ago the average cost of an acre of farmland was around £2500 – this has now increased in price to almost £8000.  This means the price has trebled in value – a startling increase in such a short space of time.  Many are speculating that the price will continue to rise and could hit £11,000 in four years time.

With such a guarantee of a profit, investors both at home and abroad have been clambering over each other to get in on the action.  And farmers are very keen to sell or expand as global demand for produce goes up.  The high demand for farmland is attributed to the security and confidence people have in ownership of something real – it is fundamentally a solid asset.  Add in Britain’s lax land rules and investors feel they are on to a winner.  This is because buyers of farmland incur no financial penalty should they sell the land or pass ownership down to the next generation, meaning no dreaded inheritance tax. However, despite this upward trend, Britain’s market still lags behind others globally with a 14 percent growth compared with that of other international markets that have seen an increase of 20 percent.

On the other hand, there is always security in bricks and mortar, whether in a prime location in London or a cute little cottage in Cornwall.  People always need somewhere to live and it is in human nature to want to settle and lay down roots.  And when comparing property with  investing in land (see business divisions investing in land article), it is worth remembering that people hold high value in something which can be called a home rather than something as cold and as simple as a land purchase.  While the property market is cooling slightly at present, at least in London, there is always high demand for property and since 1990 there has been more growth than loss in in this market.  Land on its own is always valuable; but if you can gain planning permission it is almost invaluable.  However, due to the sparseness of this resource and the need to fulfil the ever growing demand for food, it may be more difficult than once thought to build on land.  Regulations in England are stringent and even the most simplest of changes can result in you jumping through hoops – and costly hoops at that.

When all things are considered there really is no one right answer to this question.  It is important to take your own circumstances into account and not just follow the herd because various financial institutions tell you to.  Work out what will benefit you the most in the long run and find the investment that will give you the retirement that dreams are made off.

 

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Peter Black
Freelance blogger, main interests being real estate, property investment and green investments. studied in London, live in London, born in London. Chelsea fan!

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