British farms a better bet than gold

Tue Jun 26, 2012 10:46am EDT
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By Tom Bill

LONDON (Reuters) - The price of British farms will rise higher than any other class of real estate in Europe over the next four years driven by investors buying farmland to capitalize on growth in global demand for food and also to shield wealth and pay less tax.

Farmland values will rise 37 percent by 2016, beating forecast growth for gold, oil, ten-year British government bonds and homes in London's most exclusive neighborhoods, according to data compiled by Oxford Economics and the research arm of property consultant Savills.

The United Nations' food agency has estimated that the world will need to boost cereals output by 1 billion metric tons (1.1 billion tons) and produce 200 million extra metric tons of livestock products a year by 2050 to feed a population projected at 9 billion people, up from 7 billion now.

And diets in developing countries increasingly include items common in the West such as bread and potatoes, which will further boost the value of British farmland where such crops are grown, Savills director Alex Lawson said.

"Combined with that there are income tax, capital gains tax and inheritance tax advantages to putting your money in farmland," Lawson told Reuters, referring to the higher levels of tax relief for farmland owners.

Farmland will even outshine offices in London's West End district, where prices are kept high by companies like hedge funds and technology firms competing to rent a limited supply of space, the data showed.

"UK farmland will be the top performing real estate in Europe and potentially the world," Savills head of rural research Ian Bailey told Reuters. "Supply is tight and demand is especially strong for arable crops like wheat and rape."

This scenario has increased investors' focus on agricultural land globally as an asset class. Grain, a non-governmental organization that promotes the sustainable use of the world's resources, last year estimated that between $5 and $15 billion of pension fund money was invested in global farmland, a figure it said would double by 2015.   Continued...

Children walk through a field of rapeseed near Boroughbridge in northern England May 11, 2010. REUTERS/Nigel Roddis