Over the past 10 years the property industry has witnessed house prices skyrocket, but now it seems the tables are finally turning on the UK housing market as prices start to slide. However, while home owners watch their property’s worth depreciate, farmland is experiencing a welcome rise in value.
Property investment is always being touted as a good way to generate income and create a nest egg for the future – if you can get on the ladder that is. But buying a house or flat to let is no longer where the money is. If you’re looking to make a sound investment in property then you need to get yourself down to the country.
Unlike much residential property, farmland values have risen by 29 per cent on average over the past six months and are forecast to increase further this year. Not surprisingly the best quality land in the most desirable locations is set to increase the most in value, according to research by estate agent Savills.
Ian Bailey, head of Savills’ rural research, says: “Unlike most property assets, farmland continues to significantly increase in value as world food shortages and rising commodity prices make it the choice of a wider range of investors. Average values now stand at Â£5,000 per acre, although this figure masks the prices now being achieved for prime arable land, which is often realising in excess of Â£8,000 per acre, while sales of prime dairy land have recorded values of in excess of Â£10,000 per acre”.
The property market experienced a turbulent start to the year and slowed even further as the months progressed. The rate of house price growth slowed during the second quarter to 10 per cent compared with 17 per cent during the first three months. Despite this, growth for the first six months of this year is not far behind the 30 per cent achieved for the whole of last year, says the estate agent.
Jessica Simpson of Savills’ farm agency, says: “Although values continue to rise, increased costs have brought yields on farmland back to between one and two per cent. While investors are still in the market for UK farmland, they are currently looking at capital growth over the next 10 years as opposed to short-term yields.
“The credit crunch has affected confidence, particularly in the sub-Â£2 million price bracket, where applicant numbers have fallen. However, applicant numbers in the over-Â£5 million bracket have increased, which mirrors both the prime country house and prime central London residential markets”.
There has been more buying activity by private individuals who cite investment rather than lifestyle as their primary motive, while most of the sellers have been non-farmers, who are either selling up or relocating. But it seems the turbulent market is affecting farmers, as fewer of them are selling, according to Savills.
So forget renovating that house or flat to rent out – the real property investment could lie in the countryside.