Investing In Arable Land

farmland07:38 Wednesday 30th October 2013
BBC Radio Cambridgeshire

[P]AUL STAINTON: This is a shock. Farmland in Cambridgeshire is apparently hotter property than some spaces in Central London. Savills Estate Agents in Cambridge say demand for arable land here in our county is proving extremely popular with big investors. Well Adrian Wilson is a Director at Savills. He’s with us this morning. Morning Adrian.
ADRIAN WILSON: Good morning.
PAUL STAINTON: We were talking about this in the office yesterday. Are we talking Mayfair? Are we talking prices around Park Lane, and that sort of thing?
ADRIAN WILSON: Not quite on the same scale, but what is of interest and what’s hit the headlines is the fact that the growth of values in agricultural land has been rising at a faster rate than parts of Central London. So on a per acre basis, Central London is more expensive than agricultural farmland. But the rate of increase and the amount of demand in farmland has been better, more exciting.
PAUL STAINTON: Why do people want to snap up farmland in Cambridgeshire? You can’t build on it, can you?
ADRIAN WILSON: You can’t build on it, but it’s all to do with comparable investments. And in the past, when the general economy was booming, other forms of investment produced more attractive results, both in terms of yield and capital growth. But as the recession kicked in, agricultural land has looked a better prospect, and for instance in East Anglia, the average price of land at the moment is about £9,000 an acre. And that’s seen a growth since 2005 when it was about £2,500 an acre.
PAUL STAINTON: Wow that’s quite a ..
ADRIAN WILSON: So it’s pretty substantial growth.
PAUL STAINTON: So it’s an investment for people, and they’re hoping that growth continues.

ADRIAN WILSON: It’s an investment, which people are looking at. They’re looking at a long term investment. It’s always proved to be a hedge against inflation, and it’s a stable product. If you buy land, it will still be there tomorrow. If you invest on the Stock Market, you might invest in a company and the market takes a dive the next day, and you might lose 20% in a day. But with agricultural land, it’s always proved to be a long term good hold.
PAUL STAINTON: I thought prices were rising in London. I thought house prices were enjoying a mini-boom.
ADRIAN WILSON: In Central London yes, fuelled by ..
PAUL STAINTON: So why wouldn’t you invest there?
ADRIAN WILSON : Because at the moment the rate of growth is best in agricultural land in East Anglia. So far this year we’ve produced a growth of 12.1%, which is a pretty phenomenal growth.
PAUL STAINTON: It’s better interest than you get in the building society.
ADRIAN WILSON: Better interest than in a building society ..
PAUL STAINTON: A little bit better.
ADRIAN WILSON : .. and the prospects are that that’s going to continue for a little while.
PAUL STAINTON: Have we got Cambridgeshire farmers sat there rubbing their hands together, thinking oooh, I could sell a field?
ADRIAN WILSON : Cambridgeshire farmers are happy. More important their bank managers are happy. And at the moment the bank managers are happy to lend money to farmers because the asset has grown. And compared with other forms of investment, the banks are backing them.
PAUL STAINTON: So it brings a whole new meaning to the popular saying you never see a poor farmer.
ADRIAN WILSON: You never see a poor farmer. And at the moment the value of their assets has increased substantially. Farmers might say they’re not cash rich. But certainly the value of their assets has grown phenomenally.
PAUL STAINTON: So would you advise us then, all of us, if we’ve got any spare cash, buy some farmland?
ADRIAN WILSON: If you’ve got some spare cash, go out and buy farmland. It’ll prove to be a good investment. It’s attractive for a start. You can do lots of other things with it. And if you take the current climate, lots of people are putting solar farms on their farms.
PAUL STAINTON: Can you do that? Anywhere?
ADRIAN WILSON: Subject to planning.
ADRIAN WILSON: But the returns for doing so is good. And that will produce you better returns. There are also, if you just drive round the county you’ll see lots of maize being grown. And that is to fuel anaerobic digestion plants. And there it’s putting more pressure on agricultural land as a commodity producer.
PAUL STAINTON: So if you’ve got £9,000 sat in the bank, go and buy yourself an acre of farmland. Even if you just sit on it, at 12.1%, you’re going to have another, well, a thousand pounds, aren’t you, by the end of the year almost?
ADRIAN WILSON: Yes. It’s gone up £1000 an acre in the last year. The prospects looking forward may put some pressure on that. It may not be quite so rosy for year on year. If nothing else, the average price shows a big discretion between the best price which is maybe £13/14,000 an acre, and the lowest poor quality land, probably at six or seven.
PAUL STAINTON: Well, it is amazing though, isn’t it? It’s better to invest in farmland than leaving your money in the building society. A very interesting chat. Adrian, thank you for coming in this morning. Appreciate that. Adrian Wilson , who’s Director of Savills Estate Agents in Cambridge. Invest in farmland. What a return! Much better than keeping it under the mattress or in the building society.