In recent decades, the price of agricultural land could only go one way and that was up. Driven by the demand from agricultural entrepreneurs who wanted to apply economies of scale, the demand remained greater than the supply. Looking at that land market, historically there are a number of ingredients that caused prices to rise.
In the first place, therefore, the demand and urge of entrepreneurs to scale up. Secondly, there was also a great hunger for land due to the enormous competition on the market. Land for building houses, Land for nature, land for road construction, solar parks, windmills, airports, etc. Everyone needs land in the Netherlands. The demand for food also means that producing food (if properly managed) can be a profitable business model for farmers. But the main driver was and is the extremely cheap interest rate. The ever-decreasing interest rate ensures that farmers can attract cheap financing on the market and thus grow profitably more quickly.
Turning in the land market
With yields at their lowest point negative, it was a good investment. Fixed-interest periods of ten years for less than 2% made it possible to buy land at €100.000 per hectare. Now that seems to have turned around. The land market appears to be at a tipping point. Interest rates are rising, the ECB has announced that it will raise the deposit rate in steps. According to the ECB's own planning, the negative interest rate will be over in September. The US central bank Fed made it clear this week that it is raising interest rates by the largest step since 1994: by 0,75% percentage point. ECB will not lag behind and will raise interest rates to curb inflation.
The interest rate market has always reacted to this in advance and at the moment the 10-year fixed interest rates are approaching 4%. That is 2% higher than six months ago. When purchasing land worth €100.000, this means an annual cost increase of €2000 per hectare per year. Moreover, many farmers adopt a wait-and-see attitude when it comes to investing. The uncertainty and lack of perspective due to government policy results in a low willingness to invest among farmers. Land traders are already noticing that land has been for sale longer than six months ago. This has not yet led to lower trades in the land market, but that seems only a matter of time.
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This is in response to it Boerenbusiness article:
[url = https: // www.boerenbusiness.nl/akkerbouw/artikel/10899083/grondprijs-over-de-top-daling-lijkt-bezet]Land prices over the top, decline seems to have started[/url]
Every time is different.
But you can learn from the past.
The interest rate should actually be inflation plus 2%.
That was the rule in the past.
The interest payment for savers was nothing but a compensation for the devaluation of their savings
The intention was that your savings remained the same in value.
The bank needed that 2% to operate.
But now that we have started sharing our wallets with the southern countries with the euro
everything has changed.
The debt there is so high that the ECB cannot raise interest rates significantly.
Although it really should.
People with debt (mortgage) will be many percent richer this year.
People with money in the bank will be those same percentages poorer this year.
And that could go on for a while.
Putting your money into agricultural land is not so bad after all.
Security and a nice return.
And if you're lucky, a nice increase in value on top of that
Blom
There are plenty of people with money in the Netherlands who like to
take over the role of the bank.
Then you rent it from them.
And arranged
stayer wrote:Renting, leasing or long-term lease is short-term politics. The next generation is no longer a farmer.There are plenty of people with money in the Netherlands who like to
take over the role of the bank.
Then you rent it from them.
And arranged
It will also depend on where the land is located, in the Province of Flevoland the price will not drop because you can just farm there, but in areas where nitrogen emissions have to be reduced by 70% it will become difficult to sell land.
The professional ban for the group that quits could well be a blessing for ground mobility. Now farmers remain on their land with all kinds of constructions in the context of agricultural exemption. Maybe the ordinary farmers can buy a plot again instead of bought out people from elsewhere.
Southwest wrote:This professional ban is a great disgrace. If your company has to leave for a residential area, you don't get that either, do you? I don't expect it to have any effect on the price of land either, because it's about keeping livestock, and not having land. So why should that be sold?The professional ban for the group that quits could well be a blessing for ground mobility. Now farmers remain on their land with all kinds of constructions in the context of agricultural exemption. Maybe the ordinary farmers can buy a plot again instead of bought out people from elsewhere.
Just an example from the mid 70's of the last century.
Milk price was 55 Dutch cents per litre
Land price was 6 to 7 thousand per hectare
Inflation towards 10%
In 1980 the milk price was 80 cents
Land price 40.000 per hectare
And inflation above 10%
The interest 12%
Blom
blom wrote:And in 1981 the land price was halved to 20.000 guilders per ha.Just an example from the mid 70's of the last century.
Milk price was 55 Dutch cents per litre
Land price was 6 to 7 thousand per hectare
Inflation towards 10%
In 1980 the milk price was 80 cents
Land price 40.000 per hectare
And inflation above 10%
The interest 12%
Blom
