Global farmland values still rising as demand increases

International farmland still represents an excellent investment with values proving robust despite the global economic downturn, according to a new report.

The doubling of the global population since 1960, as well as the loss of around 50 million acres of agricultural land a year to economic and industrial development, urbanisation and population growth, was keeping farmland values stable, says the latest International Farmlands markets report from property consultants Savills.

Parts of South America, including Brazil, as well as recent EU entrants such as Romania and Bulgaria, are where Savills anticipate some of the best returns. It said this is because entry values are often low, especially where agricultural production is currently underdeveloped or underperforming.

In South America, Brazil, which has seen growth of 350% since 2000, Paraguay, Uruguay and Argentina have been the strongest performers and the research predicts the countries will see the best performance in further upward land price movement.

In central and eastern Europe between 2004 and 2008, Lithuania saw an increase in land values of 550%, whilst Romania and Slovakia recorded rises of 350% and Bulgaria and Latvia 300%. Despite this, land prices are still set to be below global averages in these areas, Savills said.

The report points out that increasing demand for food and bio fuel will keep land values high. 'Although there is now more commodity price volatility, against a backdrop of low interest rates the industry is well placed to weather the current recession and prosper in the future,' said Ian Bailey, head of Savills rural research.

'Areas where land is relatively underdeveloped or under performing and where values are low, and high levels of management skills are available, with working capital you will see higher agricultural profitability and therefore capital appreciation,' he added.

The report also shows that property investors buying farmland are interested in capital appreciation and the potential to increase income.