UK Farm Property and Farmland Present Investment Opportunities

Thu, 04 Jun 2009

There are huge assets in UK agricultural property and they offer the opportunity to release equity for any other use, so says real estate and land consultants, Savills .

UK agriculture stands at about £11 billion of borrowing secured on assets worth over £170 billion, minus stocks and growing crops.

This massive capital base offers oportunities for those who wish to to release equity to attain greater returns elsewhere, so says Simon Dixon Smith of Savills.

In the last 20 years the annual income yield generated on farm property has been on average between 2.5 and 5.5%, which has been greatly enhanced by increases in capital values which have boosted total annual returns to about 15% pa over this period.

The current economic recession has not had as much effect on agriculture as it has on other sectors, with asset values holding up well. Should equity be extracted from the farm, through borrowing, the owner will still enjoy the benefit of increases in the farm value whilst using the funds to generate an additional income.

UK banks are still well disposed to agriculture and will lend against agricultural assets at rates from around 2% over base or around 5% on a five-year fixed rate. UK commercial property annual yields vary from 6.5% to 10% plus depending on the location and type of asset chosen.

Lots of property entrepreneurs will inform you that they made a fortune in the previous recession. The availability of finance is the key to success, with farmers having an asset which banks are still willing to support.

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