MSCI Inc. (NYSE: MSCI), in its IPD UK Annual Rural Property Index, sponsored by Carter Jonas, has recorded a total return of 5.5% in 2015.
The 2015 total return, which was a decline from the total return of 10.4% in 2014, is the most subdued return since 2008 and reflects a slowing in the market after several years of very robust returns in line with other investment classes.
Caution around future market uncertainty was reflected in rural land capital growth, which reduced to 4.1% in 2015 from 8.9% in 2014. This marked the lowest growth since 2008 when values depreciated. The decrease in the rate of capital growth contributed the most to the decline in the total return.
Tim Jones, head of the rural division at Carter Jonas said: “Sentiment was tempered in 2015, in part due to reduced commodity prices. More recently, political discussions around Britain exiting the European Union, and the potential effect of such a move on agri-food exports have had an impact on confidence. Farmers and investors are increasingly cautious when deciding whether to increase rental holdings or invest further.
“These combined factors have contributed to the land market cooling and investors are concerned that it will be some time before there is a clear picture for the agricultural economy”
The restraint in capital value growth was most pronounced in South East, where growth declined to 5.8% from 17.9% in 2014. There was also significant moderation in capital value growth across Eastern England, East Midlands, and Yorkshire and Humberside regions. Northern England and Scotland recorded the slowest value growth at 1.1%. Rural Income return, however, held relatively steady at 1.3% compared to 1.4% in 2014.
The IPD UK Annual Rural Property Index tracks the performance of 1,873 properties with a capital value of more than 3 billion pounds. The Index is sponsored by Carter Jonas.
The full report can be found here.