Tag Archives: values
US Farmland Prices Keep On Rising
http://www.ft.com/cms/s/0/caa6bdd0-05c0-11e3-ad01-00144feab7de.html#ixzz2cP3tHszb August 15, 2013 By Gregory Meyer in New York Farmland values in a critical US agricultural region continued their rise in spite of weakening crop prices, as low interest rates and a dearth of investment alternatives spur wealthy farmers to amass more acreage, Federal Reserve economists have reported. Irrigated land in states such as Kansas and Nebraska gained 25.2 per cent year on year in the quarter ended June 30, the ninth straight quarter in which annual price rises have topped 20 per cent, the Federal Reserve Bank of Kansas City said in a survey of bankers published on Thursday. The sharp increase in the face of an expected decline in incomes will further stoke debate about whether land prices reflect fundamental farm economics or have been artificially inflated by low interest rates. In a separate survey of a district that includes Illinois and Indiana, the Federal Reserve Bank of Chicago reported farmland values rose 17 per cent from a year before. But second quarter values were unchanged from the first quarter, in the first flat quarterly results since 2009. The lion’s share of US farmland is still bought and sold by farmers, but it has also attracted large institutional investors such as TIAA-CREF and pension funds. Grain prices fell in the survey period, with hard winter wheat futures down 8 per cent in the year to June 30. Questions about the direction of US biofuels policy also weigh on investors’ minds, said Philippe de Lapérouse of consultant HighQuest Partners. The retreat in crop prices is expected to hit US farm revenues. Equipment maker John Deere forecasts a 6 per cent drop from a record $402.1bn last year to $379.7bn in 2014. The Kansas City Fed said: “Bankers expected income to drop further in the next few months due to the possibility of sharply lower corn and soyabean prices at harvest. Despite lower farm income and expectations of additional declines, farmland values surged further during the second quarter.” The survey found that farmers’ overall wealth levels, as well as “low interest rates and a lack of alternative investment options”, were more important factors behind the boom than expected incomes. To date, concerns about a looming bubble have been answered with the facts that farmers’ debts are low relative to their assets, speculators are in the minority and grain prices are still relatively high. Meanwhile, the average interest rate on farm real estate loans rose slightly to 5.38 per cent in the quarter, its first increase in more than two years in the Kansas City district. “Farm loan repayment rates softened in the second quarter and were expected to weaken in coming months with lower farm income,” the Kansas City Fed said. The Chicago Fed said most bankers envision stable land prices. “The anticipation of lower crop revenues – especially when combined with potentially rising interest rates on farm loans – portended softness in future farmland values,” its survey said. Nationally, farmland has gained 9.4 per cent on average from 2012, the US Department of Agriculture said earlier this month. Continue reading
UK Commercial Property Values Increase
UK Commercial Property Values Increase By Francys Vallecillo | August 16, 2013 Property values for stores, offices and warehouses in the U.K. increased in July as confidence returned to the commercial sector. Capital values for commercial property increased by 0.2 percent, representing three consecutive months of growth, according to the latest report from Investment Property Databank. The firm expects continued investor interest for the commercial sector on the heels of Bank of England’s announcement of maintained low interest rates unless unemployment numbers improve. “Governor Mark Carney’s recent announcement regarding the Bank of England’s future monetary policy should continue to encourage investors in and towards commercial real estate,” Phil Tily, executive director & head of UK and Ireland, IPD, said in the report. “Unless the U.K. meets any of his ‘targets,’ then interest rates and bond yields are going to remain low, and that means investors will continue to look for good value add and income opportunities in the real estate sector.” Total return was 0.8 percent with the three main sectors showing stability; offices returned 1.0 percent, industrial 1.0 percent and retail 0.5 percent, London-based IPD reported. The U.K. retail sector is struggling with negative capital movements, but it did report recovery in regional markets. Stores across the South East, Midlands and South West registered higher returns as declines in capital values eased or halted, the firm reported. Although property values are increasing, rental rates for commercial property in the U.K. was unchanged in June to 0.0 percent in July, driven by slowing demand for Central London offices. Rental growth in the city fell 70 basis points to 0.1 percent. – See more at: http://www.worldprop…h.vDaSTrYm.dpuf Continue reading
Growth In Farmland Values Slowing But Still Hot
AUGUST 6, 2013 By: Fran Howard Land values, particularly for cropland in the Corn Belt and Northern Plains, soared again in 2013, but analysts warn that current growth rates are not sustainable given the recent declines in grain and oilseed prices and the strengthening U.S. dollar. According to USDA’s Land Values report , released Aug. 2, U.S. farm real estate value, a measure of the value of all land and buildings on farms, averaged $2,900 per acre in 2013, up 9.4% from 2012 values. Regional changes ranged from a 23.1% increase in the Northern Plains region to flat in the Southeast. Not surprisingly, the highest farm real estate values of $6,400 per acre were in the Corn Belt. The Mountain region had the lowest farm real estate value of $1,020 per acre. “The last few months, the growth rate has been coming down,” says Ernie Goss, MacAllister Chair in Regional Economics at Creighton University, Omaha, Nebraska. “Softer corn and soybean prices, the stronger dollar, and slower economic growth globally are all combining to put a dent in the growth in farmland values.” Still, Goss anticipates that long-term average farmland values will continue to grow at about 7-8% a year. “Rising interest rates could also take a little air out of the land-price bubble,” Goss says. “Growth rates of 23%, 15% are not sustainable.” Yet even if land values were to fall, he says, the country would not see a repeat of the 1980s farm crisis because farmland is nowhere near as highly leveraged today. The average value of U.S. cropland, according to the report, increased $460 per acre, up 13% from 2012 levels to $4,000 per acre. Year-over-year cropland values in the Northern Plains and Corn Belt rose 25 and 16.1% to $2,950 and $6,980 per acre, respectively. In the Southeast, the value of cropland fell 2.8% to $3,410. The highest valued cropland was in New Jersey at $12,800 per acre up 4.1%, followed by California at $10,190, and Colorado at $9,000. Iowa and Illinois values were close behind at $8,600 and $7,900. Farmland values in Iowa have risen by double digits in each year since 2010, when the value of cropland was $5,064, according to the Iowa State University land value survey. “Where does this leave us? Many people have discussed the possibility that land is on a speculative bubble and that land values are going to collapse. Will the land market collapse like it did in the early 1980s or similar to the housing market a few years ago? No one knows for sure. But there are several key variables to watch to formulate an opinion,” says Michael Duffy, extension economist with Iowa State University, on his website. “One of the key variables to watch is income. Theory tells us it would be the net income per acre that is the key, but analysis shows that the total income is a better predictor. In Iowa there is a 95% correlation between land values and the value of agricultural production in the state. There is an 89% correlation between land values and net farm income,” Duffy says. According to USDA’s recent report, value of cropland fell in four states, Florida, South Carolina, New Mexico, and New York, and held steady in seven others. The average value of U.S. pastureland increased to $1,200 per acre, up 4.3% from 2012 levels. Southeast pastureland fell 1.5% below year-earlier levels to $3,380, while pastureland in the Northern Plains soared 18.4% to $81. “The attraction of farm life is increasing, so there is a high motivation to return to the farm, but buying a farm operation is not easy,” Goss says. As today’s landowners die, leaving the farm to their heirs, the heirs are often unable to buyout their siblings or cousins. Thus farms will continue to get larger and larger, he adds. Continue reading
