Farmland value growth continues

Capital growth, cash yields, hedging inflation and diversification opportunities are all traditional motives for investing in farmland and agriculture continues to attract considerable interest from governments, investment funds and private investors around the world. The need to feed a growing global population and the realisation that, managed appropriately, farmland helps mitigate against climate change and biodiversity loss has led to an increased interest in farmland on a global scale.

Figure 1 illustrates the long-term value growth and stability of farmland against other asset classes. With the increasing demands placed upon farmland, we expect this trend to continue.

Since 2002, Savills Global Farmland Index tracks capital value performance for prime farmland across the world (figure 2). The index illustrates the continued rise in farmland values globally over the past 21 years with a 10% average annualised growth rate during this period. Much of the value growth took place in the early 2000s when values rose by 27% in the five years prior to the financial crisis in 2008. At that point, some softening of values occurred when there was a correction in the exceptional rates of growth in some of the mature markets, notably Ireland and Denmark. During the next five-year period, ending in 2012, the index reported an 11% rise in value. This compares to 0.6% for the five years to 2017. Since 2017, values have strengthened, with the global farmland index recording an average annualised value growth rate of 5.2%. 

Regional performance 

In 2023, average global farmland values rose by 8.5%. The highest rates of growth were recorded in Central Europe (13%), with North and South America both achieving a 9% increase.

Poland and Romania both recorded an increase of 13% in average values during 2023. This is a steeper rate of increase than in previous years, possibly reflecting the fact that initial investor fears around geopolitical risk in central and eastern Europe have largely subsided.

According to the Argentine Chamber of Rural Real Estate land values in Argentina had declined since 2013, providing an opportunity for investment in agriculture. Land values began to stabilise in 2022 and have continued to react positively to the election of Javier Milei in 2023. 

In Western Europe, average farmland values rose by 7% during 2023. 

Australasia had a 4% fall in average farmland values, which, according to the Real Estate Institute of New Zealand, was due to a smaller number of buyers and fewer properties for sale in New Zealand, resulting in a quieter market. Following seven years of strong growth in Australia, farmland values are starting to soften. Values in both countries were further impacted by rising commodity prices and interest rates.

_{Read the articles within Spotlight: Global Farmland below.}