FRIDAY, 21 JANUARY 2011 11:53
Land Values across the planet are expected to grow over the coming year. According to a new report, land is perceived as a worthwhile, stable investment option. Consultants Savills indicate that “The straight line trend for international farmland values has remained positive.”
Also, most investors have not yet considered in investing in land- but the expectation is that, once the values are communicated widely- this trend will change.
The report states that the short term forecast shows that demand for agricultural investments from family offices, financial investors and also the sovereign wealth funds will rise. The appeal of farmland as an investment will widen as global farmland markets as opportunities appear through new emerging markets open up.
Seemingly, the financial sector and some governments/sovereign wealth funds are now lining up shoulder to shoulder with the increasing numbers of private investors who are realizing the potential return on investment in this sector. They are responding to pressure placed on agricultural land over concerns for food security.
According to the report, the reasons to invest vary by investor. As an example, the financial investors are drawn by the prospects of long term risk adjusted returns and portfolio diversification. This is in contrast with governments and sovereign wealth funds are motivated by more basic needs- like long term supply of food and nourishment.
The governments and sovereign wealth funds have a point. The report indicates that forecast for food consumption is expected to double by 2050 in line with similar increases in global population increase. Also, with expected wealth to increase globally, there will be a greater demand for higher protein diets.
This increase in demand rides opposite an expected reduction in supply- creating an optimum environment for investment. There are other factors at play here too- like urbanisation, climate change, the demand for bio fuels and rising input costs.
While effects of the recession have varied in regions across the globe, Savills predicts this supply and demand to support farmland at local levels.