Why invest in a rustic farm can be so profitable?

3 May 2019
Why invest in a rustic farm can be so profitable?

In Spain, the rural environment is characterized by being a natural environment with qualities suitable for livestock and agriculture activities. The interest for this type of real estate in these areas continues to exist, because they offer profitability, either through rent or exploitation, and possible revaluation of land in the long term.

The rustic real estate market is in a positive outlook. According to the INE, the sale of rural properties in Spain increased by 3.9% in 2018 compared to the previous year. In addition, during the past year, 13.6% of the sale of properties in Spain corresponded to rural properties, which involved the registration of 138,906 purchases of this type of property.

The real estate portal Vitrio has analyzed the current rural real estate sector in Spain to identify purchasing trends and price developments of rural properties.

The activity of rustic farms greatly influences their price
Within the real estate market, that of rural properties is one of the most varied according to the property concerned. For example, of the rustic farms destined to the agricultural activity, the typology of the land plays a fundamental role in the price, because depending on whether the land is dry, irrigated, fruit, forestry, paradera or others, the farm will be more or less valuable in terms of the return that can give to who works it. What is clear, is that the sector is prospering, as indicated by the 2017 data of the Ministry of Agriculture, Fisheries and Food, according to which the average price of agricultural land increased in ten Autonomous Communities with respect to the previous year.

In addition to its main economic activity, it is now increasingly common to use rustic farms for various purposes, such as tourism or recreation, and this is another factor that defines the value of each property.

These alternative uses of rustic properties for the purpose of second homes, vacation homes or tourism objectives are presented as a good opportunity to promote rural depopulation, which according to a study by the FEMP (Spanish Federation of Municipalities and Provinces) presents a problem real in these areas because there are more than 4,000 Spanish municipalities that subsist with less than 1,000 inhabitants and are at risk of extinction in the medium and long term.

The profitability of agricultural activity depends on various factors
The purpose or objective to which a rural property is assigned determines the profitability figures that said property may offer to its owner. For example, the return on investment of a rustic farm destined to be used as a rest home will be completely different from that land dedicated to agricultural activity or if, on the other hand, the use of the farm will be to build a farm. house or rural accommodation for tourism purposes.

In any of the cases, the possibilities and uses of rural properties are diverse and, therefore, can present a good investment opportunity. In the case of agricultural activity, the market is positive in the sense that agricultural income (value generated by agricultural activity) has broken a record in 2018 growing by 3.4% over the previous year; showing an increase in the value of both animal and vegetable production. In this activity, profitability depends on the quality of production, the weather, market prices, and other variables. In addition, we must bear in mind that, if you invest in a farm with agricultural production purposes, you need to know the land and its activity so that it can be really profitable.

The geographical location within the peninsula is also an important agent that influences the economic valuation of rural properties. In this sense, taking as reference the average price per hectare in 2017 of agricultural land, Vitrio has concluded that the most economical areas are Extremadura, Aragón, Castilla y León.

Despite these trends by autonomous communities, the prices are quite varied, even within the same province. Other factors influence the size of the farm and its main use, the ease of access to the property, its proximity to developed cities, tourist centers and points of interest such as health centers and the availability of basic services such as water and electricity. .

The inheritance plays a fundamental role in terms of transmissions of rights
Unlike the trend that marks the transmission of urban farms, where the sale is the main form, in rustic farms, heritage plays a leading role. Of the 387,145 transfers of property rights of rural properties during 2018, most corresponded to inheritance (157,252) and the rest were distributed in purchase and sale operations (138,906), donations, swaps and others.