Land as a form of long-term investment

31.3.2022

Read Time: 3'

Real estate Scenarios immobiliaries Patrimony

Even if its yield is not exceptional, the land can have a return if it’s well cultivated. If you were not farmers but investors, the purchase of land could be a productive investment when it is possible to make buildable the plot purchased

Assuming that "land" is to be considered one of the primary goods, it is possible to work it, cultivate it to harvest either for personal consumption or resale; use it as pasture and livestock; use it as sediment for secondary activities directly related to the primary (e.g., agritourism). We can say that buying land is an investment vision.

Agricultural land is a good investment in the long run: even if its return is not exceptional, it will still have a yield if it is well cultivated; moreover, it can turn into a productive investment if one is not a farmer but an investor and can make the purchased plot buildable.

To evaluate your investment, it is essential, first of all, to distinguish between investment for production or not. Then it is necessary to know its value, which can be established by appraisers who will take into consideration several determining factors in defining it:

1. cadastral income,
2. the possibility of having water for irrigation,
3. exposure to the sun,
4. chemical constitution of the soil (important to know which type of cultivation is most appropriate),
5. proximity to communication roads,
6. presence of rural buildings or not.

In case the investor is an agricultural entrepreneur, it will be imperative to identify, also depending on the rural areas, what type of product to grow and what kind of cultivation method to focus on (organic, with or without GMOs, "Km zero") and what sales methods to implement (direct, online, through distributors). Thus, it can be said that buying farmland is an attractive investment as long as the chosen crops are suitable for the type of fund being purchased.

It should be remembered that farmland prices can vary greatly depending on the area, region, and characteristics. A good appraisal, or a reasoned business plan, is crucial in understanding what the land will be used for.

Faced with a financial market with much uncertainty, tangible assets such as farmland have become an attractive option. The population is increasing rapidly, and with this increase, the need for food is also growing. As such, agricultural land, given its scarcity, automatically increases in value globally; in small or highly populated countries, investing in agricultural land is a strategic investment for food security and self-sufficiency in the face of the international food market.

Some research institutes have also determined the value of a hectare of land in different parts of Italy. For Crea (Council for Research in Agriculture and Analysis of Agricultural Economics), the national average for the value of one hectare of land is 20,290 euros.

Specifically:

agricultural land in the inland areas of the Apennines and Sicily and Sardinia are at the bottom of the ranking of these values, not reaching 6,000 euros;

in the southern regions, a hectare of farmland in Basilicata is worth an average of 7,387 euros.

in Apulia, the average values are 13,644 euros, while in neighboring Campania, the average value is 17,910 euros/ha;

average land values in the entire area of Central Italy are 14,945 euros. In Tuscany, the average value of a hectare is 17,764 euros, while at the bottom is Abruzzo with 11,001 euros;

Lazio and Molise are in the middle of this range of values, 14,519 and 14,292 euros, respectively;

in the north, however, values take off:
- in Emilia Romagna it is 31,152 euros/ha,
- in Veneto it reaches 53,177 euros/ha;
- in Trentino to 54,169 euros/ha.
- Finally, in Liguria, the average maximum value is reached: 100 thousand euros per hectare.

Nicola Paronzini

Author's personal opinion

This article constitutes and reflects the exclusive personal opinion and assessment of its Author; it does not replace and cannot be considered in any way equivalent to professional advice on the subject matter of the article.
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A chartered accountant, owner of Paronzini firm, director of Pgn Services srl; formerly
contract professor (tourism law) at Iulm University in Milan and (tourism law and cultural heritage law) at Upo, Novara, and Domodossola campuses. Active in tax law and accounting matters for SMEs, agriculture, and the third sector; auditor, registered on the national list
of members of the Performance Evaluation Body, qualified for counseling in the over-indebtedness crises.