The Best Safe Investment in 2010?

As the UK heads into a period of extended inflation, low interest rates and volatile stock markets, investors are looking for safe investments to preserve and grow capital. Many investors are turning to gold as prices continue to rise due to an increasing demand from investors, but more savvy money men consider farmland to be the safest investment in 2010 as demand for food continues to rise and a severe shortage on the supply side continues to push up prices and create safer investment returns.

Farmland is considering a safe investment as it is a renewable resource, constantly reproducing the commodities that the population needs – food! Therefore consistently generating an income for landowners and retaining its value, especially in times of inflation.

The value of agricultural land in the UK has risen by 13% for the first six months of 2010, and by 19.7% for the twelve months to July according to the Knight Frank Farmland Index, the industry standard for measuring agricultural land values. In fact there has not been a single seven year period since records began, where farmland in the UK has not risen in value quicker than the rate of inflation, providing safe investment returns for landowners. The income generated from leasing good quality land to commercial farmers also goes some way to replacing the lost risk-free income on cash deposits due to such low interest rates.

There is always of course an element of risk, land values could fall for example, but as demand for food is rising at the fastest pace in history and the amount of land per person on the planet has halved from 0.42 hectares to 0.21 hectares, the next seven years is extremely unlikely to be the first time that agricultural land values will fall. There is also a risk that your farming tenant could default on his rent, but this risk is also minimal as agricultural occupancy rates in the UK are close to 100% year round.

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