Industry Eye: Rural property enjoys capital growth of over 6pc year-on-year

As we reach the half-year mark the agricultural land market has shown signs of an increased supply and judging by the sales concluded to date, both on and off market, we consider that there remains sufficient appetite for the holdings brought to the market. This has been borne out by the results last week seen in the IPD UK Rural Property Investment Index.
By The Newsroom
Published 2nd Jul 2010, 15:50 BST
Updated 2nd Jul 2010, 15:51 BST

The total return reported for 2009 was 8.2 per cent which was made up of 1.8 per cent income return and 6.4 per cent capital growth.

The same total return over three years was 11.4 per cent and over five years 12.3 per cent.

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Those compare with commercial property, which had a total return of 3.5 per cent and residential property, which had a total return of 11 per cent in 2009.

When analysing this data it is clear that rural property and residential property have both benefited from capital growth in excess of 6 per cent year-on-year.That data is borne out in the marketplace.

Carter Jonas has been extremely active in the first six months of 2010 buying and selling investment farms and vacant land off market. There remains a strong purchasing base for both vacant and let land due to taxation benefits with land being a finite asset with potential for further capital growth.

Funds continue to be drawn to the sector with many seeing land as a safe haven and with that the valuation of agricultural land becomes even more challenging.

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We have recently conducted the sale of 100 acres of bare arable land at Marton-cum-Grafton which met with exceptionally strong interest and averaged 8,300/acre.

At the same time we have purchased for clients bare arable land averaging just over 5,000/acre.

That is a 60 per cent discrepancy in price and knowledge of the market becomes even more essential when considering a transaction of any form.

The recent Emergency Budget has left agriculture relatively unscathed.

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The well-flagged changes in Capital Gains Tax to a higher rate of 28 per cent were not as draconian as expected.

On a positive note, there still remains Entrepreneurs Relief and Agricultural Property Relief for Inheritance Tax purposes appears untouched.

A further attraction in holding land as an asset is its ability to generate energy.

Much has been written about feed-in tariffs (FITs) and the renew-

able energy projects available.

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We have seen considerable interest in micro and medium scale wind generation schemes and the impact of the FITs continues to create interest in such schemes.

This increased interest in the rural economy is reflected in the record number of entries for the Great Yorkshire Show.

We look forward to continuing our support of the show and will be welcoming all at stand 146.

We will be pleased to have our national renewable energy team present to answer more direct questions on renewable opportunities for your business.