Investment in land
Among many investment tools there is a fundamental one that the whole civilization is founded on. Literally. This asset is land, and such great people as Bill Gates, Warren Buffett, Michael Burry — they all own great agricultural estates and believe this asset to be one of the most promising investment tools today.
Why Do Large Investors Choose Land?
Bill Gates, a billionaire and one of the richest people on Earth is also one of the greatest land owners in the USA. Overall, he owns over 110’000 hectares in 19 states. His land estates in Washington state can even be spotted from the space. All the land that the businessman owns is used for raising crops, also, McDonald’s buys potatoes for its famous potato fries.
Warren Buffett is famous for his conservative approach to trading; for over 30 years, he has been an owner of a large farm, and he believes it to be one of his best investments. Back in 2014, he shared his success in his speech to investors, and then already, his investment in land tripled, and the price of this land grew by five times. Looking at the land market today, one can suppose that Buffett’s profits from this investment have been only growing since then.
Michael Burry, a financial expert who had predicted the crisis of 2008, outlined the great value of agricultural land with clean water access back in 2011. His prediction has come true again, and the investments gave great profits.
These and many other business people are giving the right estimations to the land investment potential that is directly linked to the world’s global trends.
The More People Are There — The More Expensive It Gets
The United Nation’s forecast is that by 2050, the world’s population will reach 10 billion people. Now already, when we are fixed at the level of 7,8 billion people, the world lacks food: in 2020, over 811 million people were facing hunger, and 155 million — even extreme hunger. The value of food, first of all, the crops, will grow with the further demographic growth.
Another thing that a growing population leads to is growing cities. People living in big metropolitan cities are used to the suburbs turning into new city districts, and the pace of this transformation is alarming. More and more agricultural lands are subject to it, their total area is reducing annually, and, according to the forecasts, this trend will continue till 2040. This factor will affect the land price, and the fewer land there is left, the higher is this asset’s cost.
Another important factor is the growth of well-being among people. The European Commission believes that by 2030 the number of middle-class people will amount to 5.3 billion, mostly thanks to the development of the Asian and Pacific regions. Obviously, the growth of income will lead to the growth of consumption, which will also affect the demand for agricultural products.
Therefore, the natural development of economy will make agricultural estates an even more valuable asset. Today, by profitability, land surpasses all other types of real estate, as well as S&P500. There are also charts of prices for assets tied down to land, and, compared to other assets, it’s easy to note that only land has a steady upward trend.
Good Protection from Inflation
It is well-known that the inflation rate in the USA is estimated by the Consumer Price Index (CPI). There is also an interesting correlation between this index and the prices for land: the land price charts usually are similar or outrun CPI. Over the past 15 years, the correlation of agricultural production with CPI amounts to 66%. This makes investing in the land a good way to not only protect yourself from inflation but also outrun it.
Investment in Land Is Easier Than It Seems
Physically, buying land is surely the most secure way to place your capital, but not anyone can afford it. Also, owning land means certain responsibilities that are not an option for investors. However, there are easier and more convenient ways to put your capital into that industry. For instance, papers of collective investment funds like REIT (Real Estate Investment Trust) are aimed at investments into fertile land. Farmland Partners (FPI) and Gladstone Land Corporation (LAND) are good examples of such funds.
If we compare the charts of these papers to S&P500, then, over 2021, the LAND quotes grew by more than 130%, while S&P500 only grew by 27%. Even though today, the stocks look overpriced, there is no reason for the land price to fall.
Land Tokenisation
Land is probably the most valuable of the existing assets. What can be more secure than terra firma and fertile soil? This is the foundation of our civilisation and one of the main natural resources on the planet. What can have the qualities that land possesses — unlimited service life, no wear out and higher productivity under rational use, no production costs. It’s hard to imagine a safer asset. All that made land even more attractive for another financial industry — the crypto market.
It’s been years since they started discussing tying cryptocurrencies to real assets to make a safe stablecoin as an alternative to USD. And land has a great potential here. Why not? Tokenisation is covering more and more industries, in fact, it is possible to digitalise anything now.
Let’s take NFT, non fungible tokens. They are digital certificates of unique objects that confirm the right of owning the asset. Usually, it is about a digital asset, but why not tie this scheme down to physical assets too?
Just imagine how convenient such a token could be. In fact, it would be a document that confirmed owning a land lot, which means it would be a very liquid asset. A stablecoin that is backed with land could perform all the functions of effective money — a means of measurement, of transactions, of savings, of payments, it would also become a universal international currency, and its price would grow due to all the reasons given in this article.
If we put aside the subjunctive mood and imagine this situation in real life, we can come to a conclusion that land tokenisation is the best way to solve the problem of ineffective fiat money not backed by anything. But even if we stop making up plans for such major changes in the money system, a stablecoin backed with land could be seen as a good investment asset with huge potential.
Do you like this idea? Would you invest in that token? Share your opinion in the comments!
According to the analysis group findings: Reserveum.
