Farmland prices in Europe
CFC focuses on investments in Central European farmland. In this context CFC primarily focuses on investments in Romania. Apart from the extremely fertile and low-priced farmlands and the favourable continental climate, this is also connected to risk management. Even though fine and often less expensive farmlands can also be found elsewhere in the World (e.g. in Africa, Brazil, Ukraine or Russia), CFC limits itself to the EU and feels comfortable with European property rights and European farmland subsidy regulations.
Since the growing political and economic stability has increased in many Central European Countries (CEEC), the enormous potential of their farmlands is increasingly recognized for the food producing potential as well as the interesting investment value. Farmland prices in Western Europe have risen considerably during the last 20 years. Sometimes (in the Netherlands) doubled to no less than 80,000 euro per hectare. In some countries this relatively high price level is currently stabilizing.
There are various reasons for this:
- The relation to the returns of agricultural products does not allow further value appreciation
- The European market mechanism is becoming increasingly free, which impeded the rise of some land prices at locations were land prices are already relatively high
There are large differences between farmland prices in Europe. Expensive countries such as Ireland and the Netherlands can no longer be subject to any price increases. But at locations where the price of land is very low, values will rise quickly and adjust themselves generally to the general European level.
Due to the fall of communism and the introduction of a free market mechanism many former Warsaw Pact Countries find themselves on the eve of large agricultural economic growth.
Qualitatively high-quality land combined with low wages guarantee an increase of the agricultural production with corresponding returns. This will lead to a large value appreciation of the most important production factor: Land.
The Savills Global Farmland Index demonstrates that the less developed markets such as Romania, Hungary, Brazil, Argentina and Poland have undergone the highest percentual increases of farmland values between 2002 and 2010.
The major reason for the accelerated growth within most of the Central European countries was their new membership of the European Union (EU) in 2004. With Bulgaria and Romania as last comers following in 2007.