Rural property strengthens investment return
LAND is asserting its investment pre-eminence again, strengthening its position against other sectors.
That’s the view of Peterborough-based rural division partner at Carter Jonas John Henniker-Major following the results of the IPD (International Property Database) UK Rural Property Index for 2009.
The index measures ungeared total return to direct investments, and in 2009 the total return stood at 8.2 per cent, which was an improvement on the 2008 result of 1.7 per cent.
Mr Henniker-Major believes the results reinforce the recent flight to safety offered by rural property, often linked with gold as a “secure haven”.
He believes that the economic storm clouds circling the world economies will only heighten this sentiment, as governments tighten their belts and face up to the reality of reducing the crippling sovereign debt.
While the rural property sector includes a basket of assets, including residential and commercial property, the land element forms a significant proportion.
The value of vacant possession land is continuing to strengthen and this will, inevitably, increase the land investment value as a consequence.
Mr Henniker-Major said: “2010 is once again proving that the demand for rural property and, in particular, land, is increasing with a further reduction in supply into the market.
“This scarcity is likely to continue in the medium to long term as investors seek safety and, in reality, who would willingly convert rural property into cash with the risk of where to invest the proceeds?
“While some agents believe values are already high enough, the sentiment in the market indicates there is still further to go. However, we also need to acknowledge and reflect that all property sectors are cyclical and markets do and will move in both directions,” he added.
“While analysts point to commodity prices, input costs, energy costs, subsidies and interest rates as market shapers, the biggest and key influence has to be scarcity.”
supply and demand: John Henniker-Major discusses the increasing demand and contracting supply of rural land.