Farmland values across the globe
The capital appreciation of farmland value is the main component of investment performance. This is tracked by our Global Farmland Index* launched in 2012 with values to 2010. Where data is available the Index now reports values to 2012.
Across the world farmland values continue to grow. Our Index shows an average global annualised growth since 2002 of 20%. This growth was fairly steady apart from a slight softening during 2009 and 2010 when there was a correction in the exceptional rates of growth in some of the mature markets, notably Ireland and Denmark. Capital values here have subsequently stabilised and are beginning to show positive growth.
Since 2011 capital growth across all markets has regained its previous momentum. Evidence, real and anecdotal, shows that this trend has continued into 2013 and we expect positive growth to continue in the short to medium term.
Key points from our Global Index:
• The highest growth rates were recorded in the emerging markets of Romania, Hungary, Poland, Zambia, Mozambique and Brazil. We expect this to continue.
• Average farmland values in Romania grew by 40% per year – double the average annualised growth and was the fastest growth of any country since accession to the EU.
• Hungary and Brazil recorded annualised growth of around 25%.
• Polish farmland values recorded steady growth over the past 10 years, which has continued since the initial rise post accession into the EU in 2004.
• For the mature markets growth has remained healthy, from over 7% up to 20%, especially when compared with alternative property assets.
The farmland market in Africa is limited and immature but it is developing rapidly and we are regularly reviewing market data from this region.
Recent comparable evidence in Zambia, where several farms came to the market in 2012, suggests that capital growth can typically range between 20% and 60% per annum discounting value uplift related to infrastructure improvement.
This is highly variable and growth is specific to individual farms and locations and depends on the stage of infrastructure development, size, layout, water availability and operational performance. There is clearly demand for the premium product with proven operational capacity.
These include well established farms in the areas which have good external infrastructure, for example in the farm blocks of Mkushi.
Other property assets
For the countries where robust data is available, the investment performance of farmland continues to exceed that of many alternative assets.
For example, the NCREIF Farmland Index (USA) showed a total return of 19.61% for agricultural properties bought as investments in 2013. US farmland has outperformed stocks and bonds since 1970.
In Great Britain, the investment performance of farmland (in hand farming and let land) and forestry has continued to outperform most other assets over the past 10 years and has been comparable with alternative assets over the past 30 years.
To illustrate the strength of farmland performance across a wider range of countries, Graph 1.2 looks at the annualised capital growth (2002 to 2012) of the three core property assets, farmland, commercial (all property) and residential.
With the exception of markets with regulatory restraints, farmland in general has significantly outperformed residential and commercial assets in each of the countries shown.
Savills Global Farmland Index*
The Index, launched in 2012, is based on data from 15 key farmland markets and aims to provide a comparative indication of farmland value trends around the globe. The Index is derived from the average value of crop/arable land in domestic currency converted to US$ per hectare.
Although converting to US$ per hectare can have an effect on annual growth rates in terms of domestic currency, it gives potential investors a good starting point for comparable analysis. It is a common denominator, which corresponds to the currency of global markets. The values are represented as an Index relative to values in the year 2002 (2002 = 100).
In addition to this index we are now tracking the performance of new markets in Zambia, Mozambique, Tanzania, Ghana, Uruguay, Malaysia, Indonesia and other emerging markets – based on real data provided by our international farmland team.