News Farmland
Farmer with leasehold the bobbin of high inflation
Rising inflation is often related to adverse effects on the economy, purchasing power and consumer confidence. But also within the agricultural sector there is a group that is likely to be hit hard by the soaring inflation, namely the leaseholders.
The ground rent that must be paid annually - as it is called lease with ground lease - is adjusted annually at various large companies on the basis of the consumer price index (CPI) of the CBS. Over the past ten years, inflation as calculated by Statistics Netherlands has fluctuated between 0,3% and 2,7% on an annual basis. In the first two months of this year, inflation is already 6,4% and 6,2%. The harmonized consumer price index - inflation according to the European model - even amounted to 11,9% in March.
Link to inflation
Now that inflation is rising rapidly, the canon associated with it will rise just as fast. That is a big difference with the regular lease, where the lease is calculated on the basis of the earning capacity within the agricultural sector on the basis of data from Wageningen Economic Research (formerly LEI). Fagoed uses a fixed percentage of the principal sum (the financing) as ground rent. The principal is kept in value and indexed every year with the CPI. ASR real estate and Rhoon Pendrecht Cortgene (RPC) both index the canon annually on the basis of the CPI. The current canon at most companies runs from approximately 2,5% to 2,8% of the purchase price to a maximum of 70% of the market value in free state. Add an increase of 8% or 10% to the canon and you are talking about a considerable amount per hectare that has to be coughed up extra. It will be quite a challenge for various farmers to achieve this, especially in view of the other price increases of, for example, fertilizer and crop protection.
Jurphaas Lugtenburg
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