“Land alongside gold remains the prime asset class identified as a safe haven in the still turbulent market “ Richard Liddiard, Carter Jonas
Gold prices have gone through the roof but it’s possible that the land under the fields of cereals, turned to gold by summer sun and now largely harvested, may be as attractive in the long term.
The latest report from property consultants Carter Jonas on The Model Estate, notional property based on real life examples, shows that while fine wines and gold are the best asset classes in terms of capital growth they do not enjoy the returns on capital – or the Inheritance Tax advantages – of agricultural property.
And the strong demand is backed up by the latest Royal Institute of Chartered Surveyor’s (RICS) Rural Land Market Survey for 2011, which was published this week, and shows that land prices are reaching all time record levels, particularly in the south east.
Richard Liddiard, National Head of Rural Agency for Carter Jonas, quoted in the RICS report, claims, "The farmland market in England remains very strong even with a larger perceived volume of the land in the market. The actual area trading is hidden by the large number of private off market transactions taking place, partly forced by eager buying agents on behalf of clients wishing to invest in land and agricultural estates.”
Despite the increase in land values, he adds “key indicators show land as an asset to buy rather than sell. The South East region is a popular area for residential farms and estates in particular and prices for the top end residential property now achieve £8-10,000 per acre. Pasture land is reaching £6-8,000 per acre and higher when smaller parcels are on offer.”
Carter Jonas also co-sponsored the 2011 report from Investment Property Databank (IPD) which shows that over the five years to December 2010 rural property, with annualised returns of 12.0 per cent, performed better than commercial property (1.1 per cent) and residential property (7.4 per cent).
And the data in the reports is more than supported by actual activity in the south.
Richard Liddiard reports that the first eight months of this year saw land sales in excess of £40 million conducted through Carter Jonas in the region, often at strong prices and off market as buyers and sellers appointed the agency to confidentially seek out and sell prime assets on their behalf.
“It’s interesting to see how the various asset classes perform and how they compare over the years,” says Mr. Liddiard. “The core asset value of rural land may not be climbing as fast as gold or fashion assets but there are serious investors still looking to buy, sometimes taking advantage of Sterling’s weakness against the Euro.
“When it comes to Inheritance Tax, there’s nothing to compete with a carefully structured agricultural holding for minimising the liability and this can make up the difference in the asset’s capital value very quickly. With other investments, it can be very easily eroded.
“At Carter Jonas we have specialists who can advise on the best structure for land holdings and provide a complete management service for investors, who will still be seeing a healthy return.”