Comparing farmland and property.
This commentary argues that farmland values may double over the next 10 years, while over the same 10 years residential and commercial property values are unlikely to increase.
What happens to farmland in times of inflation?
Farm profits tend to rise strongly in times of inflation. Craigmore farm revenues have grown 12% per year since 2020, while costs have increased at less than 5%. This is enabling increased cash distributions. We are targeting 6.5% this year in Craigmore Farming Partnership:
Increasing profitability is leading to a steady increase in land values. Capital growth has been 6.3% pa in the last two years.
Total returns of over 10% per year on farmland have been well ahead of residential real estate and equities in New Zealand, which have been flat to down for two years.
But won’t rising interest rates also become a brake on farmland values?
