Buying leased land is an attractive investment for investors looking for recurring income.
With an average yield of between 3% and 5%, it is an attractive way of diversifying your assets for savvy investors. This profitability can also be accompanied by good prospects for capital gains. Here we reveal the facets of this often little-known investment, and how www.ma-propriete.fr can be your ally in this process.
Farm rent, the agricultural rent paid by the farmer to the lessor, is governed by rules set out in the Rural Code for each département. It varies each year according to a national farm rent index. It is generally between €160 and €230 per year.
The average price of rented farmland in France is €5,060 per hectare, according to SAFER (Société d'Aménagement Foncier et d'Etablissement Rural) statistics. This represents an average discount of 18% compared with the sale price of freehold land, giving a gross rental yield of between 3 and 4.5%.
The price of rented land has risen from €4,060 per hectare in 2012 to €5,060 in 2022, an increase of 24.6% (cumulative inflation over the same period is only 10%).
This potential increase in value means that it is much more attractive to save for land.
Will the price of rented land continue to rise in France? It is difficult to answer this question.
However, land prices in France are among the lowest in Europe. This is the result of agricultural regulations, in particular the SAFER's right of pre-emption and the Contrôle des Structures. Logically, this price differential should narrow over time.
Support for agriculture should continue and lead to a lasting improvement in farm incomes. This should also help to sustain farmland prices.
Finally, even though various laws have been passed to limit the artificialization of land, 125,000 hectares of farmland will be converted to urban land between 2021 and 2031. This will inevitably have an upward effect on the price of vacant and rented land.
Farmland cannot be stolen and, unlike other property investments, is not easily damaged. What's more, over very long periods, the price of land is disconnected from the financial markets, which helps to secure the value of your assets.
Farm acquisitions are an effective way of diversifying an investment portfolio, diluting the risks associated with sector concentration.
By opting to buy rural land, you are promoting the growth of French agriculture. You can also include environmental clauses in a rural lease, promoting environmentally-friendly farming practices and stimulating the local economy.
The basic system for leasing agricultural property is the status of rural leases. Rural leases have a minimum term of 9 years, with an automatic right of renewal for the farmer. The amount of the rent is regulated, and the owner has very limited options for terminating the lease or renewing it.
It is also possible to opt for longer leases and benefit from tax advantages.
If you lease your farmland under a long-term lease (for more than 18 years), you may be entitled to an allowance on the value of your land as part of an inheritance, a gift or for property wealth tax purposes.
For inheritance tax, since the Finance Act for 2023, this allowance is 75% up to €300,000 and 50% above this threshold. The owner then undertakes to retain ownership of the property for 5 years. The 75% allowance can be increased to €500,000 if ownership is retained for 10 years.
The allowance for property wealth tax is 75% of the value of the leased property up to €101,897 and 50% above that threshold.
SAFER has a right of pre-emption over all agricultural property sales. Once the notary has been notified of the proposed sale, SAFER has 2 months in which to exercise its right. If it does, it will take the buyer's place and then sell the property to a buyer it considers to have priority.
In addition, the leasing of land requires an authorisation to farm under the Control of Structures, granted to the farmer by the competent authorities.
As well as offering portfolio diversification, investing in agricultural land can be a highly profitable investment. You can also use environmental clauses to support the agro-ecological transition in French agriculture. Depending on the type of tenancy, the tax system can also help you to pass on your assets and reduce your property wealth tax liability.
A well-orchestrated initiative, ma-propriete.fr is a potential partner in your quest for property.
