Attractive returns

Farmland investments generate attractive returns comprised of current lease income and expected appreciation of the value of the land.

The lease income is an annual cash payment, which will broadly move in line with the farmer’s operating profit. The value growth, however, will be realised when the farmland is sold.

In many countries farm earnings are boosted by public subsidies. In the EU, farmers receive direct support for each hectare cultivated. Support under the EU schemes is paid to the farmer who cultivates the land and not to the landowner, even if the landowner leases the land to the farmer. In general, farmers in Romania and Slovakia are willing to lease the land at an amount equivalent to the direct payments received under EU support schemes. The long-term increase in farmland value goes to the landowner, who bears the financial risk.

A comparison of the annual returns for a number of asset classes shows that the accumulated increase in the value of farmland is higher than for the remaining asset classes except forestry land. Furthermore, the characteristic features of farmland as an inflation-proof asset make it attractive for investors who wish to reduce the inflationary risk of their portfolios.



The graph shows the accumulated increase in the value of farmland compared with other asset classes in the period 1991-2009 (1991-(1)=100).

Due to structural differences between European countries and differences in exchange rates between these, the historical farmland price figures are based on US data.