The rural land market in France continued on its upward trend in 2012. Over the year the market value of agricultural land and forest land rose respectively by 14% and 5-10%, while the price of vineyards – which are real micro-markets showing an enormous price range from €27,440 per hectare in the Bordeaux region overall, but up to €2.5 million per hectare for a Pomerol vineyard – stabilised.  

Agrifrance, a subsidiary of BNP Paribas Wealth Management, has just published its annual Economic Review which also provides some answers as to where one might invest one’s money. Rural land is looking more than ever a safe bet; it is low-risk and returns on investment are not closely correlated with the performance of the financial markets.

"Despite a gloomy economic environment in Europe, the rural land market was very buoyant in 2012," underlined Head of Agrifrance Benoît Léchenault, adding: "Agricultural land, vineyards and forests all continue to attract investors who’re looking for tangible assets. However you do have to be prepared to leave some of your wealth tied up over the long term. Clients who buy into land generally keep it for two or three generations."

The Economic Review breaks the rural land market down into three distinct sectors: forestry, agricultural land, and vineyards. 

As regards forests, in spite of prices for deciduous timber dropping 15% and coniferous woods by 18%, land prices showed steady increases over 2011-2012. Two years ago, the average price had just increased by close to 10% to reach a level of around €4,000 per hectare. 2012 figures are not yet complete, but Agrifrance has announced an increase of around 5-10%, taking the average price to between €5,000 and €6,000 per hectare. "At the moment there is little forestry land on offer and a lot of demand: owners of forests have the timber available and can sell it," points out Benoît Léchenault.

When it comes to agricultural land, last year’s excellent harvests in France, coupled with a spectacular rise in prices worldwide, gave cereal farmers average revenues of €74,400. This very healthy situation has naturally had an impact on the price of land. In 2012, the average price of agricultural land settled at around €5,275 per hectare, representing an increase of 14% over one year. Over the last ten years, agricultural land has risen in value by 74%.

Although last year wine growers suffered widely from the vagaries of the weather, would-be purchasers of vineyards still nevertheless need to find quite a large amount of capital if they want to buy in to this sector. In the Bordeaux region, the entry ticket starts at €27,440 per hectare, but it can go up very quickly, to €1.16 million per hectare for a Saint-Emilion and €392,000 per hectare for a Pessac-Léognan. The prestigious ‘appellations’ are priced even higher: €2 million per hectare for a Pauillac and €2.5 million per hectare for a Pomerol (up 27% over the last twelve months). Nor should we forget the Champagne region, which is still very attractive, with an average price tag per hectare of over €1 million in 2012, i.e. an increase of 3.5%.

It is also interesting to note that, in spite of the Chinese appetite for French vineyards, there are overall fewer foreigners investing in the rural land and property market nowadays. In 2011, just 6,000 hectares passed into the hands of foreign buyers. This represents only 1.1% of land area sold and 1,600 transactions out of the 218,000 purchases made over the year. The economic crisis has somewhat dampened the mood of the British, but UK citizens still remain enthusiastic about owning a second home in the south of France, though they now account for only 50% of foreign buyers, down from 70% in 2004. Buyers from the Benelux countries make up the other large group of foreign investors, comprising 32% of the total.

Concludes Agrifrance Head Benoît Léchenault: "Compared with the CAC 40 listed companies, 40% of which are in the hands of foreign investors, the level of foreign investment in the rural land market is relatively low".