Central European farmland prices outpacing every other region

Central European markets with the fastest-growing farmland values are beset by political and economic uncertainties that dampen the opportunity set, according to a recent report from Savills, a London-headquartered real estate services provider.

In a report released earlier this year, Savills provided an update to its Global Farmland Index, which compares values across markets by converting local arable land prices per hectare into US dollars. The report also contains an opportunity-versus-risk matrix, which incorporates political, economic and agronomic factors into its comparison of farmland markets.

Savills’ Farmland Index has increased by an average of 13.3 percent annually since 2002, with annualized growth of 27 percent between 2003 and 2008 moderating to a 2 percent pace over the past five years. The report attributed the moderation to pressure on commodities prices, stressing that the effects have varied widely across markets.

“Although our Global Index suggests a general slowdown in the average growth of the values for global farmland, the rate of appreciation varies considerably across the globe,” said Ian Bailey, Savills’ director of rural research. “We believe farmland investments will benefit from the long-term positive fundamentals of farmland ownership, with increased world population, food production and competitive land uses, such as renewable energy, driving demand.”

Regionally, the report highlighted strong growth in the Central European markets of Bulgaria, Poland and Romania, where between 2002 and 2016, land values per hectare increased nearly nine, 11 and 24 times, respectively.

“The Central European countries surveyed have strong ‘benefit’ scores driven by healthy potential returns from good agronomic performance and the opportunity for large-scale farming,” Bailey wrote.

“However, these are dampened by increasing political and economic uncertainty and therefore the ranking of Central European markets in our matrix has fallen since 2012. This does not mean that opportunities do not exist, but significant due diligence is required.”