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US farmland market has outperformed other real estate sectors, research shows
The US farmland market has outperformed other US real estate assets over the past 15 years recording an average total return of 13% for agricultural investment properties, a new analysis shows. This performance has been boosted over the last three years by high commodity prices, according to the analysis report form international real estate advisor Savills. It points out that while not immune to volatility, the farmland market has not been affected to the same degree as the residential and commercial property sectors. ‘Farmland and agriculture in the US can offer real opportunities for top investment performance but unlike the UK, where demand from non-farmers is a real driver of value, in the US commodity price fluctuations are likely to have a greater effect on values because of the closer relationship with farm profitability,’ the report explains. This differing weighting of the productive capacity on value is reflected in the income yields. In the US 3 to 6% is achievable in the key agricultural areas of the US, which contrasts with typical income yields of 1 to 3% in the UK. Where land is let in the US the average lease period tends to be shorter averaging from three to five years in order to avoid declining rental yields and to maximise investment returns. In the UK, farm tenancies let in the open market average between five and 10 years. Since 1950, average values across the US recorded an annualised increase of 6.6% with an increased rate of growth during the past 10 years of 8.1%. The corresponding figures for UK farmland are 7.5% and 13.7%. The report explains that these higher UK growth rates are largely explained by a reduced supply and the increased presence of non-farming/investor buyers. In the US, farmers represent 75% of buyers with investors accounting for the remainder while in the UK the proportion of farmers buying during 2014 was 45% with institutional/corporate and non-farmer buyers fairly evenly spread across the rest. ‘For investors looking for scale, high value niche markets and the opportunity for a reasonable income yield, the US is a realistic proposition particularly when combined with the medium to long term capital growth forecasts against a backdrop of a mature and transparent market,’ the report adds. It also points out that the US farmland market is not bound by one law with regard to Foreign Direct Investment (FDI) and some states and provinces restrict overseas ownership and subsidies are not available to overseas individuals and entities. ‘However, with some advance planning investment can be efficiently structured to preserve the UK tax advantages of investment in farmland while allowing investors access to the US market,’ it says. Currently, relatively little US farmland is held in direct overseas ownership accounting for just 1.15% in 2012 with the largest proportion of overseas ownership concentrated in Maine. The US has more arable land… Continue reading
UK home owners less optimistic about property prices, poll suggests
Optimism in the UK property market has slowed down, with fewer home owners anticipating an increase in the value of their home over the next 12 months, a new survey shows. Just under half, 49%, believe their home will increase in value over the next year compared to 54% in January and 55% a year ago. A further 49% anticipate that the value will stay the same whilst 2% believe it will decrease. The survey from Clydesdale and Yorkshire Banks also shows that Londoners are the most optimistic with 73% anticipating an increase in the value of their home, followed by 62% of those in the South East and 56% of those in the East. In sharp contrast 11% of those surveyed in the North East expect the value of their home to decrease, a view shared by 6% in the North West and Scotland. Those living in the South East and London are the most upbeat about rising property prices with 67% in the South East and 64% in London citing this as the main reason for anticipating an increase in the value of their home. In contrast only 37% of those in the North West share this view. The report suggests that the key factor for those who think their home will increase in price is rising property prices as well as the positive impact of the economic recovery. ‘It has been positive to see confidence returning to the property market however our latest research has shown that this is levelling out with a drop in the number of people who believe their home will increase in value over the next year,’ said Steve Fletcher, director of retail banking. ‘There are still a number of property hot spots, such as London and the South East, where property prices are rising and we anticipate that this will continue however this is not mirrored across the UK as a whole,’ he pointed out. He added that the Banks have a range of competitive mortgages including a two year fixed, fee offer product up to 75% LTV at 2.09% and a five year fixed, fee offer product up to 75% LTV at 2.89%, both for re-mortgage applications above £75,000. Continue reading
Average property prices still falling in Spain, but sales are up
Although the recovering in housing sales in Spain continues with transactions up by 1.9% in April, prices are still falling, the latest figures show. The data from the General Council of Notaires shows sales up almost 2% in April but prices down by 3.9% year on year nationally. Overall a total of 30,758 transactions were completed which the council says ‘reflects the stabilisation in monthly sales’. The average price of homes bought in April was €1,188 per square meter with new homes, the data also shows and the number of mortgages available is rising, up 12.3% year on year. Buyers are also able to get higher loans with the average mortgage sixe up 9.2% to €122,119. Meanwhile, the average Spanish home costs €200,000, according to the annual Spanish housing market report from appraisal firm Euroval. But there are considerable regional variations in values. In Barcelona, for example some 54% of homes for sale are offered at less than €254,000, whilst in Madrid 61% of homes for sale cost less than €247,000. While in cities like Alicante, on the Costa Blanca, 58% of homes have a price below €143,000. The Euroval report also looks at what has been happening in the Spanish property market in the last couple of years and shows that sales increased by 21.63% between 2013 and 2014. It also shows a decrease in the number of new homes being sold and the largest numbers of transactions are still taking place in Andalusia, which represents 19.2% of the total volume. When it comes to valuation activity, the firm reports an 11.5% increase in 2014 over the previous year, after eight consecutive years of declines. But this is just 30% of the volume of appraisals which were carried out in 2005. Continue reading
