The Viking’s may no longer come to the UK in Longboats to forcibly take the land, but they are buying vast swathes of it in a world fast running out of farmland to feed the global populace.
They are also paying rather a lot of money for it – the price of agricultural land in the UK has nearly doubled since 2006, from £3,304 per acre to its current level of £6,514. But with such land yielding just one harvest a year, canny Brits are paying only £1084 per acre for farmland that yields two harvests a year in the ideal growing conditions to be found in South America. Accessing such hands-off agricultural investments is surprisingly easy and available through Intelligent Partnership exclusively for Financial Intermediaries and their clients.
Scandinavians are in the vanguard of wealthy foreigners buying up vast tracts of British countryside. But what’s the appeal, asks Christopher Middleton.
We knew the Scandinavians were dominating our television schedules with their dark detective dramas – but the news that they are buying up large swaths of real-life British countryside has come as an unexpected plot twist. Not only does Swedish tycoon Stefan Persson (boss of the H&M fashion chain) own 10,000 acres of land in Wiltshire and Hampshire, but Danish billionaire Anders Holch Povlsen has been putting together a collection of Highland estates like a set of Lego bricks.
Thirty-nine-year-old Povlsen, whose family owns the 12,000-employee fashion chain Bestseller, is reported to have bought two giant new pieces of land in Sutherland (the 24,000-acre Ben Loyal, and 18,000-acre Kinloch estates), in addition to the 47,000 acres he already owns in Inverness-shire (bought in 2006) and the 30,000 acres near Fort William (bought in 2008).
This brings his total acreage to about 120,000, just behind our own Dukes of Westminster (133,000), Cornwall (aka the Prince of Wales, 134,000), Atholl (146,000) and Buccleuch (240,000). Not bad going in the space of just six years.
What is going on? Given that the past century has witnessed a stampede of homegrown British aristocrats desperate to divest themselves of their family acres, why are these new, Scanda-bred squires champing at the bit to take them over? The answer is – money. While we conventional homeowners have been looking on in horror as our house prices plummet, it seems that people who have put their faith in mud and grass, rather than bricks and mortar, have been reaping a rich financial harvest.
According to the latest Rural Market Survey from the Royal Institute of Chartered Surveyors, the price of agricultural land has nearly doubled since 2006, from £3,304 per acre to its current level of £6,514. On top of which, that land has become much more scarce; the estate agents Savills says that whereas 650,000 acres per year used to change hands in the 1950s, today that figure is down to 100,000 acres. In other words, not only are people holding on to their green pastures for longer, but they are charging a lot more when they do decide to sell.
“The price has pretty much trebled in 10 years,” says Alex Lawson, Savills’ director of farms and estates sales. His counterpart at the estate agents Knight Frank takes an even longer perspective.
“If you bought in the early Nineties, you’ll have made something like a sevenfold profit,” says Clive Hopkins, head of estates and farm sales. “For many years, land in this country was significantly undervalued, and overseas buyers, the Danes in particular, stole a march on their English rivals.” In fact, it’s estimated that, in 2008, some 15 per cent of people buying UK agricultural land were foreign investors, attracted by the waft of underpriced farmland.
“Over a 10-year period, the only commodity to have outperformed agricultural land is gold,” says Hopkins. “If you invested in farmland, you’ll have done better than investing in the FTSE 100.” That comes like a sudden dunking in the village pond to those of us who had assumed that rural properties were being afflicted by the same economic blight as has been eating away at the value of our urban and suburban homes.
Far from it, though. Whereas most people’s investments have been withering in barren bank soil, owners of UK farmland have seen their portfolios blossom and bear fruit. And, rather than being squeezed dry, profits look like they are going to get even juicier.
“The future actually looks good for farming,” says Christopher Miles, Savills’ director of farms and estates sales in the east of England.
“Farming income was up by 25 per cent last year, and food prices globally rose by eight per cent. As a result, land is very much in demand; the other day, we put a 1,000-acre block of land on the market in Norfolk, and it sold within a week.”
It’s not just the value of the land that brings in the buyers, either; it’s the fact that you can pass it on to your family without HM Revenue wanting a slice.
“The agricultural element of your estate is inheritance tax-free,” explains Miles. “You have to have owned the land for two years, and although you have to be farming it yourself, you can, in fact, contract that work out. There are always farmers wanting more land, and if they don’t have to buy it, they can make more profit.”
So let’s get this right. Not only are you buying a commodity that increases in value by £44 per acre per month, but you can hand it down tax-free to your children and grandchildren. Sounds like a bargain. Wait, though, it gets better; on top of all that, the European Union will give you money.
It’s called the Common Agricultural Policy direct payment, and although we don’t know what each UK farmer gets (the European Court of Justice has declared it illegal to publish how much is given to individuals), we do know that the National Trust got £2.6 million last year for its farmland, and that there are 13 people in the UK who each got more than a million euros, plus one who got 1.97 million euros.
“This idea of wealthy people accumulating large entitlements to receive income support from the state is rather uncomfortable,” says Jack Thurston, a campaigner for greater EU openness, and co-founder of farmsubsidy.org. “If I were in the business of providing income support to farmers, I’d make it means tested, like the rest of the welfare system.”
This idea summons up the vision of foreign billionaires hiding their Ferraris in the forest and pleading poverty when the means-testers call. For besides Swedes and Danes, there are plenty of other nationalities who, in recent years, have bought chunks of the British countryside: French, Norwegians, Swiss, Germans, Russians and even Indians.
Among the best-known names are Chelsea football club owner Roman Abramovich (an £18 million estate in Sussex), his fellow Russian, the oligarch Boris Berezovsky (a £10 million estate in Surrey) and the al‑Maktoums, the Dubai royal family, who have grouse moors and estates in Scotland and the north of England.
Not surprisingly, locals don’t always appreciate rich foreigners buying up large bits of their land (six per cent of Scotland is in overseas ownership). Suspicions have been voiced about Anders Holch Povlsen’s claims that his motives are environmental and ecological, rather than financial, and there was criticism of the vigorous red-deer culling on his Inverness-shire estate.
That said, Scottish Natural Heritage has applauded the deer-control policy, and the way it has allowed the landscape to recover, resulting in what the Highland Foundation for Wildlife calls “excellent regeneration”. As to the benefits a wealthy patron can bring a local economy, you have only to visit the small Northumberland village of Blanchland, in early autumn, when an estimated 55 per cent of the population is involved in catering for the needs of the wealthy Russians, Arabs, Americans and London City types, who come for the grouse shooting.
Not that owning a big estate is all about champagne and canapés and banking your EU subsidy cheque. If you’re going to keep up the value of your investment, there’s a lot of unglamorous re-planting and ditch digging, and, let’s face it, those grouse won’t feed themselves. And of course, not everyone is a foreign billionaire.
“Just my water bill for the year here is £5,000,” says 42-year-old Tom Allen-Stevens, who didn’t buy his 450-acre Oxfordshire estate a couple of years ago, but inherited it from his father and grandfather.
“Staying afloat is a constant battle, everything is not so much for now as for the long term. Sure, I get £35,000 a year from the EU, but without that, this place would be running at a loss.
“You never have any cash, but you do have land; that’s your capital investment. That’s the thing you hold on to.”
Yes, in the words of the financier Warren Buffett, land is an even better investment than gold. After all, people can always dig more gold out of the ground, and make more gold bars, but they’re never going to make any more land.
7:21AM BST 14 May 2012