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LV High demand for agricultural land; interest in ALTUM loans for land purchase and working capital remains high
Agriculture continues to grow, and the industry also provides participants with further development opportunities. Observations show that some farmers have managed to use the pandemic period as an opportunity by actively applying for and using ALTUM state support programs.
The agricultural land market continues to experience a trend where demand for land exceeds supply. Land prices also continue to increase, reaching unprecedented highs in some regions in 2020. At the same time, interest in purchasing agricultural land remains, with the Development Finance Institution ALTUM last year providing loans for land purchases totaling 17 million euros, which is 15.3% more than a year earlier.
The highest demand for financing for land acquisition in 2020 was in Vidzeme, both in terms of the amount granted and the number of transactions. Land acquisition transactions were also actively financed in Zemgale and Kurzeme, but there are no significant changes in the number of transactions. In Latgale, however, where the availability of land for agricultural use is relatively lower, as there are many undeveloped properties, activity is the lowest, but there was growth last year - both the number of transactions and the financing granted increased.
In order to promote the cultivation of agricultural land and production, starting from February 26 of this year, the loan limit for the purchase of agricultural land has been increased to one million euros.
Agricultural land price growth slows down
Since 2017, the total number of transactions in the country has been decreasing by an average of 1.2 thousand per year, with 8.5 thousand land purchase transactions registered in 2019. Meanwhile, land prices, although with a smaller growth trend, continue to increase. The average price increase of agricultural land in the country from 2016 to 2018 was 8–12 % per year, but in recent years it has decreased to 2–4 %.
Prices and their dynamics differ by region – in areas with intensive agriculture and with fertile, technologically suitable areas for agriculture, land prices are significantly higher and continue to increase. The fastest price increase over the past four years has been in Zemgale – by 30 %, but in Kurzeme and Vidzeme – by 26 %. In approximately 95 % transactions, the prices of agricultural land range from 2,000 to 8,000 euros per hectare. A lower or higher price should be considered subjectively influenced, not reflecting the objective market level.
You need to think about working capital in advance.
The demand for working capital for farmers has also increased, with ALTUM granting loans worth more than nine million euros in 2020, which is 39.3% more than in 2019.
Farmers almost always need working capital in the spring, so the number of applications is large. In order to process all of them on time, it is recommended to go to the consultation in time and prepare in advance, identifying your needs and financial capabilities. A working capital loan can be received by farmers, fishermen, agricultural service cooperatives, as well as fruit and vegetable producer groups. In turn, the amount of financing is determined by assessing the size of the farm, intensity and production activity indicators.
For additional information:
Sandra Eglīte
ALTUM Public Relations Specialist
Tel: 26577810