Rural Property Index Overview

Rental returns

Our analysis of our managed rural investment portfolios over the past two years records an average income return of 0.71% in 2018, rising to 0.77% in 2019, and slightly down to 0.73% in 2020. Over the past decade, our research shows rural portfolios have consistently produced a strong return when compared with other property classes, although this is predominantly driven by capital growth and active management rather than rental growth.

Across rural investment portfolios managed by Bidwells, average capital growth in 2018 was 5.35%, falling to 3.17% in 2019 and 2.72% in 2020. The softening of agricultural land values over this period accounts in part for this falloff.

Land Values

Our analysis finds that, having reached a peak over just over £10,000 per acre in 2014/15, land values slipped over the last five years or so prior to the pandemic. However, during 2020 average values rose by approximately 3% to just over £8,000 per acre.

We have seen a gradual contraction of the vacant possession premium in recent years as a result of the stagnation of capital values against a continued rise in subject to tenancy values. The discount from vacant possession value has fallen from 45% in 2010 to 37% in 2020.

Bidwells research identifies that, whilst there are a great number of factors affecting land values, there is a noticeable trend between the introduction of an areabased subsidy in 2005 and the subsequent rapid growth in agricultural land values.

Over the period from 2005 to 2018, the average price of agricultural land in the UK rose by 128% in real terms, whilst net farm income reduced by 12% in real terms. The growth continued at pace until 2016 when the UK voted to leave the EU and the future of Basic Payment Scheme was jeopardised.