LONDON (Jan 18): Chinese investors are buying British farmland. Though the sums involved are modest compared to the billions they spend on agricultural land in Africa, Latin America, and the United States, they are expected to grow.
Property agency Knight Frank, says 5% of its farmland buyers are Chinese, and Clive Hopkins, head of farms and estates at the agency, said the Chinese buyers were commercial property investors looking to diversify portfolios by adding farms to their shop, office, and factory holdings in the cities.
They mainly buy 400 hectare parcels of arable land or general-stock farms in southeast England, spending around £5 million (RM23.95 million) each.
Hopkins said Chinese investors arrived in the market last year.
"They focus on an area south of Birmingham and east of Exeter, because they mainly arrive in Britain via London, so their centre of orientation is south rather than north," he said.
Property agency Savills reports that Chinese buyers are interested in so-called hobby farms — country houses with about 20 hectares of land rented out to neighbouring farmers.
Simon Grier-Jones, head of land at property agency Hamptons International said investment in farmland by wealthy Chinese would grow as they became more knowledgeable about British property.
"They have bought the biggest, smartest house in Mayfair, have seen how that money can buy them 50 flats in Mayfair, then seen how that money can buy them a hobby estate outside of London and are now looking at the farmland in itself, and seeing that this can be a worthwhile investment," Grier-Jones said.
British farmland values hit record highs in the first half of last year and are forecast to rise further this year.
Chinese agricultural investment was better established elsewhere, but perceptions in China that it was safe to buy a house in London, but not property on the British countryside was changing, Grier-Jones said. Other Asian investors and Middle Eastern buyers were looking to speculate in British farmland, too.
A small market for British farms among Hong Kong-based British expatriates is well established.
In Scotland, they buy estates valued at between £3 million and £10 million, said Charles Dudgeon, rural director at Savills Edinburgh.
Five million pounds buys a 4,000 to 6,000 hectare Highlands estate with deer stalking, salmon fishing, and grouse shooting rights, he said.
Income from British farmland is relatively low — most gross returns were between 2% and 3%. But strong capital growth made farmland attractive to investors.
According to Knight Frank's farmland index, agricultural land values have risen 193% over the past 10 years to reach an average of £14,945 per hectare.
Values have been driven up by farmers expanding their holdings to increase profits at a time of rising agricultural commodities prices.
British agricultural land values were underpinned by a benevolent climate and close proximity to the large European market.
"There are climatic extremes around the world," Hopkins said. "You have your grain basins in eastern Europe where in a good year yields are great, but in a bad year, poor. But in the UK and central Europe the climate is very steady."
"Do we get monsoons? No. Do we get tidal waves? No. Are we on the edge of a big market? Yes, the European Union."
Against a deteriorating economic backdrop across Europe, British farmland values fell 1.8% in the last six months of last year.
However, they will reach £24,700 per hectare by 2015, a 65% rise on today's values, Hopkins forecast.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said farmland had more going for it as an investment than many other assets.
"Prices are going to go up," Rubinsohn said. "Fundamentally there seems to be support for the market. Over the medium term food is a key area where prices will be relatively strong."
Ian Hepburn, partner at buyers agency, Private Property Search, a subsidiary of estate agency Strutt & Parker, said arable land in eastern England had most investment potential, because growing grain was simple and its crop yields consistent compared to other types of agriculture.
Owners could hire a land agent to represent them and contract out the farming to commercial farmers, he said. The owner would need to visit their land no more than once a year, he said.
Investors ought to buy at least 150 hectares of land — with grain stores but without farmhouses, which add to maintenance costs — he said. Prices start at £18,500 per hectare of arable land in eastern England. — SCMP
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January 26, 2012 1:11:00 AM
anonymous said...
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January 26, 2012 1:11:00 AM
