IPD: UK rural property investors enjoy record returns

The Investment Property Databank (IPD)'s Rural Property Investment Index recorded a total return of 25.7% in 2007, up from 17.6% the previous year. The record return makes the Rural Property Investment Index the second-best performing IPD index in the UK last year, outstripping commercial and residential property, which earned investors -3.4% and 17.0% respectively.

Returns from the Rural Index also far outshone the comparable UK bond and equities indices to December 31 2007, which earned investors 6.4% and 5.3% respectively. The total return can largely be attributed to a rise in capital values. Capital growth was 23.2% for held property. However, 2007 was the lowest income-producing year since the index began in 1981, yielding 2.1%.

Last year, tenanted rural farmland also saw net disinvestment. The investment figure as a percentage of the year-end capital value was -3.2%, down from the previous year when disinvestment hit its highest level since 1996. Strong regional variations were recorded in terms of total returns on held property. The East Midlands achieved the highest returns at 34.9%, well above the UK average, while the North West and North East returned 16.6%.

IPD co-founder Ian Cullen said, 'Specialist investments in rural land and forestry have demonstrated their diversification strength in 2007 - for that small group who have stayed loyal to these sectors.'

The IPD Rural Property Investment Index measures ungeared total returns to direct investment in a sample of tenanted farmland. At December 2007 the sample comprised 672,326 acres of land from 277 estates with a total value of £2.2bn.