Why buy acres??

[d-wales]

I was recently chatting with an old uni mate, who is now a financial advisor, about a few acres that have been sold near me for £12k per acre.

He was asking me why anyone would do this from a financial view point, because if they invested in the stock market they would get a lot better return.

Stock market has been averaging about 10% growth over the past 70 years, one £12k acre would never return £1200 per year, especially with no input.

It got me thinking is he correct??

The only argument that I could think of was for inheritance reasons, but he assured me that a Stock ISA is inheritance tax free and £20k per year can be put in with no tax on any growth in value.

Are there reasons why somone would buy acres instead of investing?

 

[Exfarmer]

sure stocks and shares ISAs are not Inheritance tax free and if you look at the stock market over the last 20 years you would have been exceptionally lucky to get 10%

 

[upnortheast]

At least any gain on farm land is yours.
Shares, ISA & the like, some smart arse fund manager / financial advisor is drawing commision & fees, regardless of gains or losses.

 

[Spencer]

And investors putting money into land generally have more than 20k per annum to invest

 

[Nearly]

To move the neighbours further away.
To buy something that you can kick rather than a number on a piece of paper.
Roll over is a pain when you are bidding against it but if we have a big, unexpected windfall in the future then I might be the daft bugger.

 

[egbert]

I was recently chatting with an old uni mate, who is now a financial advisor, about a few acres that have been sold near me for £12k per acre.

He was asking me why anyone would do this from a financial view point, because if they invested in the stock market they would get a lot better return.

Stock market has been averaging about 10% growth over the past 70 years, one £12k acre would never return £1200 per year, especially with no input.

It got me thinking is he correct??

The only argument that I could think of was for inheritance reasons, but he assured me that a Stock ISA is inheritance tax free and £20k per year can be put in with no tax on any growth in value.

Are there reasons why somone would buy acres instead of investing?

Seems to be some confusion here.
Annual return/output would be rental value for land (or potential income from farming it), against any annual dividend from shares (are 'stocks' different?)
Capital growth when you come to cash it is something else.
I've no idea over 70 years, but land has been a very solid performer in this area these last few years.
I've watched land go from £1k/acre to £8k+ over 30 odd years.

The big difference for me is that buying a notional share in something pretty ethereal can't compare with buying actual dirt.
They don't make the latter any more, and unlike the former, it can almost never go bang and disappear.

 

[Against_the_grain]

I was recently chatting with an old uni mate, who is now a financial advisor, about a few acres that have been sold near me for £12k per acre.

He was asking me why anyone would do this from a financial view point, because if they invested in the stock market they would get a lot better return.

Stock market has been averaging about 10% growth over the past 70 years, one £12k acre would never return £1200 per year, especially with no input.

It got me thinking is he correct??

The only argument that I could think of was for inheritance reasons, but he assured me that a Stock ISA is inheritance tax free and £20k per year can be put in with no tax on any growth in value.

Are there reasons why somone would buy acres instead of investing?

Short term it doesnt stack up, but generationally its one of the best investments you can make, its just whether you will be around to see the fruits of it.

 

[Wigeon]

Buy land. They don't make it any more.

So said a wise chap once

 

[Adeptandy]

sure stocks and shares ISAs are not Inheritance tax free and if you look at the stock market over the last 20 years you would have been exceptionally lucky to get 10%

I was going to ask which investment fund it was

 

[carbonfibre farmer]

I was going to ask which investment fund it was

"Past performance is no guarantee of future performance"

 

[toquark]

Adjusted for inflation it’s more like 6-7%. Still more than farming land but probably not much better than farming it plus the asset inflation of the land over time.

You can’t walk the dogs across a share portfolio, or look out the window and enjoy the view, you can’t shoot a duck or grow a crop or adjust the landscape to your taste. There are many many reasons for buying land which aren’t tangible or quantifiable necessarily. Saying nothing of the multitude of tax and business reasons why people may buy acres.

 

[David.]

Our accountant will always tell you that it is possible to make land look a good or bad investment by picking the points in history when you invested or sold.
But then, I don’t think he would ever advise buying.

 

[Nearly]

I was going to ask which investment fund it was

Mum (84) just cashed bond with St James' Place. £80k into her pot, until she gave it to us.
No point in brother living in a rented house while she is cash rich.
She struggles to spend her pension since we pay farmhouse bills.

SJP have done very well out of the bond for last 30 years while bond has made less progress than putting the lot into a house in 1990.
The world is heading for massive revaluation.
A good time to have a lot borrowed rather than a lot deposited?

 

[Happy at it]

There's a nice depressing post Christmas, pre new year thread.

To widen it out further, we all know buying land solely for financial reasons, doesn't make sense at all, but Its better not to think too much, or we might all actually catch on to the fact that the financial return on the business of farming is pathetic in relation to the investments of time effort and money that are made towards it.

 

[andybk]

had a lump invested in isa stocks , last 3-4 years basically lost money it made in the previous 3-4 years , local land came up for sale , didnt even think about it , as said above its worth more than asset value to farm and walk over , plus iht going forward for kids , and a bit more security from flaky landlords ive delt with in past

 

[JohnGalway]

I bought land perhaps 20 years ago now. I sold some other poorer land early this year, for in the region of 7x what I paid for the other land. The difference in value came about because of the CAP schemes attached to it. Ten years previously the land I sold would maybe have made just over twice what I bought land for.

The point is, be careful of where the value comes from in a thing. When CAP goes I expect that land to crumble in value, so the choice is to dispose of it and the income attached now, or play a game of chicken with it.

I like the idea of an index fund, but I know little to nothing about how they work which is why I haven't invested.

House prices were never going to fall either, until they collapsed.

 

[BRB John]

Most farmers are clearly not in it for the money.
So if the option is spend your money on something that is your life or just another number on someone portfolio somewhere then I guarantee the land will always win.
You only get one life it's too short to waste. Especially if you're a farmer.

 

[T Hectares]

If you buy more land you can buy bigger tractors or more stock, what’s not to like ?

 

[Kidds]

At least any gain on farm land is yours.
Shares, ISA & the like, some smart arse fund manager / financial advisor is drawing commision & fees, regardless of gains or losses.

Poor argument given the amount of hangers on farming has.

 

[Hill Ground]

At least any gain on farm land is yours.
Shares, ISA & the like, some smart arse fund manager / financial advisor is drawing commision & fees, regardless of gains or losses.

To be fair, if a non farmer buys farm land there would be as many agents, advisors and other "experts" drawing ££ off it as in stocks and shares!!