Agrifrance 2018 Rural Report: Focus on The Farmland Market in France
SLOWDOWN IN PRICE INCREASE
In 2017, farmland in France cost on average €6,090 per hectare, representing a small increase (+0.9%) compared with 2016, and up more than 5% in ten years. Like the previous year, this sharp slowdown must be viewed in the context of declining revenues and prices for agricultural products. However, market values are increasing and transactions for quality land remain active. Prices in France are still lower than those of its European neighbouring countries. There is little land on the market, accounting for barely 2% of farmland in use. Finally, the ‘urbanisation’ market appears to be picking up due to pressure from growing urban centres, translating into the acquisition of farmland.
GRAIN-GROWING LAND PRICES CONTINUE TO OUTSTRIP GRASSLAND
Arable prices are 34% higher than grazing land. A hectare of grain-growing land costs on average €7,350 compared with €4,830 for a hectare of pasture. Prices barely rose in 2017: +1.1% for grain-growing land compared with +0.6% for grassland.
At the top end of the market, the best grain-growing land fetches in excess of €20,000 per hectare. Such regions include Nord Pas de Calais, Santerre, Champagne Crayeuse and Saint Quentinois, as well as certain regions in the South of France, such as Crau and the Durance Valley. At the bottom end, the cheapest land costs between €2,500 and €3,000 per hectare, for example in Mayenne, the Jura and Morvan
IN A LOW-INTEREST RATE ENVIRONMENT, FARMLAND REMAINS ATTRACTIVE
For landowners, the average price of leased land (i.e. with a tenant in situ) in 2017 was €5,040 per hectare, up 1.8% on 2016, and 1% more than freehold land. There was a noticeable increase for grain-growing land (+2%) versus grassland (+1.6%).
For the first time in ten years, rents fell y 2.6% y/y in 2017. Nevertheless, with an average farm rent of €164 per hectare and per annum, the gross yield on leased farmland was still 3.3% in 2017. In today’s context of low interest rates, this is by no means insignificant. The average gross yield varied between grassland (3.7%) and grain-growing land (3%), depending on the region and the type of land.
More than ever before, economic models are moving towards the search for added value, even if this means that land and working capital are increasingly uncorrelated, as in trade and industry. Individual farms represented 58% of total farmland in 2000 but only 38% of the total surface area in 2013. At the same time, the number of operating companies is on the rise. New alternative methods of financing are emerging (crowdfunding, land piggybacking by external investors, etc.). In this context, we observe a surge in the number of non-operating investors, because in the medium term, farmland and vineyards remain an attractive means of diversification.
Agrifrance is the specialist rural property division of BNP Paribas Wealth Management, offering clients seeking the right investment and wealth management solutions the benefit of over 40 years of experience in the viticulture, farming, forestry and prestigious homes markets. With its network of recognised professionals, Agrifrance is also able to provide complementary services such as expertise in and management of rural properties.
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