Investment in rural farmland delivered a positive annual total return of 1.7% last year, according to the IPD UK Rural Investment Property Index.
The positive returns were supported by increases in rents amid a low transaction environment in which capital values fell 0.3%.
Investment in tenanted farm land outperformed conventional commercial and
investment grade residential property which returned -22.1% and -15.3% respectively.
Although the total returns were favourable relative to other sectors – and to equities – they are the lowest levels since 1998, which saw returns of -2.8%.
Tim Jones, head of Rural Division at Carter Jonas, one of the Index’s sponsors, said: “Rural property remains in demand and there is a case for optimism; rent reviews last year with increases of 20% to 30% were not uncommon, while investors continued to seize opportunities to generate improved returns from the uplift in capital and revenue generated by converting secure tenancies from the Agricultural Holdings Act to Farm Business Tenancies.”
The IPD UK Rural Investment Property Index measures the ungeared total returns of a direct investment sample of tenanted farm land.
At December 2008, the IPD UK Rural Investment Property Index comprised 589, 766 acres of land on 243 estates with a total capital value of just under £2.1bn.
