Rural Land and New Money

For centuries, the wealthiest families in Britain were the country’s largest landowners. As commercial activity grew from the 17th century onwards though, this tendency began to diminish, but only slightly. Later, the Industrial Revolution created many new fortunes outside the landowning aristocracy. Nonetheless, there was always some portion of new urban wealth that was converted into large landholdings by those in search of social status or simply a secure investment. The Industrial Revolution saw some of this activity too, though the practice was largely on its way out, as rural wealth came to comprise a small fraction of the overall monetary value of Britain’s assets, whether rural or urban and whether agrarian, commercial, or industrial in nature. In time, rural landowning would lose some of its social value too.

Land Wealth

The Industrial Revolution created new fortunes very different from those already possessed by the wealthiest aristocratic families. Between 1801 and 1881, national income earned in British manufacturing, trade, and related businesses rose from £94 million to £638 million. It’s been a trope about new fortunes in Britain that their possessors, who earned wealth in business or even in a profession, often converted their savings into land investments at some point in their lives. But was this still a truth or an outdated cliché?

The answer depends on the era. In the 17th century, this was in fact very common; by the 18th century, a little less so. Still, at the start of the 19th century, land continued to confer both status and security and this was appealing to those who made their money elsewhere. So, the practice lived on, even if on a more limited basis.

The continuing supposed appeal of buying land was two-fold. First, owning an estate was a mark of social status and even if industrialists and merchants might hold out against the temptation, many did not. Second, land was considered a secure investment. A retiring industrialist was often enticed by a safer investment than the volatile industries or trades that were the original source of his wealth.

However, in this respect, land was not unique. Government bonds were also a destination for fortunes obtained in industry and commerce, meaning there were alternative safe vessels for wealth besides landownership and this may explain part of the reason why the conversion of business wealth into land was somewhat less pronounced in the 19th century than, say, the 17th century. Simply buying a portfolio of safe securities was now a viable option too.

Market Value of Land

An acre of rural English land might be worth around £30-35 in the mid-19th century. This was a high price relative to rents. Land has rarely been appealing in terms of yield alone. In 19th century Britain, rural land would yield 2.5% to 3.0% on average, sometimes a bit lower and sometimes higher. Indeed, the yield on land was lower than the yield on government bonds available at the time. Some attributed this to the social value of large landholdings. A non-economic benefit of land ownership was one factor that could explain the high prices.

The potential to appreciate was another. After a few years of a quiet market, land values surged higher in the mid-19th century. During this period, the rural economy was prospering. Rents on rural land rose while land values climbed by an even higher proportion as the ratio of sale prices to rents expanded. Rural land which could be bought at a price equal to thirty-five times the annual rent in the 1840s reached prices of forty-five times rental value by the 1870s. These rising multiples over rental values was partially attributed to competition for land among the new sort of landowners who were made rich from life in business during the middle years of the Industrial Revolution.

Land was so valuable that buying large estates became almost prohibitively expensive for all but the wealthiest. Even as urban wealth grew, buying a 10,000-acre country estate, a holding that was actually small compared to the largest estates in Britain, would still have exhausted the wealth of most industrialists, or at least absorbed a very considerable fraction of it. Still, despite the costs involved, the volume of land transactions grew. An ‘Estate Exchange’ was even formed in 1857 by London land auctioneers intending to formalize land trades; new real estate publications were launched during these boom years too.

New Landowners

During the Industrial Revolution, new landowners included those who made their fortunes in finance. The banker Samuel Jones-Loyd became Baron Overstone in 1850; from this point, he ceased to be directly involved in banking. Overstone invested £1.7 million on land purchases on which he came to earn £93,000 a year. He was the largest example of a new landowner, owning 54,000 acres when counting those holdings of his close family too. The Barings and Rothschilds were also bankers-turned-landowners, though their landholdings were on a smaller scale. Across all of Britain, only Baron Overstone among those of a non-aristocratic background possessed over £1 million in land.

Samuel Jones-Loyd, 1st Baron Overstone, by photographers John & Charles Watkins (source: National Portrait Gallery)

Besides financiers, industrialists were also buying country estates. Around the same time as Baron Overstone was investing in land, James Morrison, a textile industrialist, was also buying large tracts. His descendants owned 106,900 acres by 1883. Other industrial fortunes that invested in land were the iron industry fortunes of the Guest family in Wales and the Bairds in Scotland.

Those were among the largest landowners of a non-aristocratic background. Other big landowners included a few more fortunes of an industrial origin, from brewing to engineering. However, available data on landholdings is largely confined to the largest estates and so it’s difficult to ascertain exactly how common were smaller landholdings by businessmen. At the high prices of the 1870s, even a holding of 1,000 acres could tie up a substantial amount of money.

Agricultural Depression

In 1870, the Economist reported that estates were commonly bought at “thirty years’ purchase” or more, meaning thirty times their annual rental value. Forty years’ or even forty-five years’ purchase was also common, resulting in a yield of 2.2 – 2.5%. This was the market peak; thereafter, prices for agricultural produce declined and thus land values fell after 1880 as rents also deflated. Land values fell by more than rents, the drop in prices being exacerbated by the threat of higher taxes and more common defaults by tenant farmers.

The land boom of the middle of the century had come to an end. The volume of real estate transactions plummeted. While the Estate Exchange in London reported a peak of £11.7 million in sales in 1877, this fell to a low of £4.0 million in 1887.

From forty-five years’ purchase in the mid-1870s, prices fell to under thirty years’ purchase by the early 1890s. The results of the depreciation were several; for one, estates could be bought more cheaply. The silk industrialist Samuel Cunliffe Lister bought devalued land during the depression. William Armstrong, an armaments manufacturer, bought a 10,000-acre estate in Northumberland for just £60,000 in 1894 adding to existing holdings in that part of the country. Another effect of the depression was that some landowners sought to increase the revenues of their land, extracting resources like coal or slate from mines that could be developed where suitable, for example.

Cragside, part of the Northumberland estate of William Armstrong (source: National Trust)

Estates

Though there were alternative places to recycle fortunes earned in industry, land ownership was still a common store of wealth. According to research by W. D. Rubinstein (1981), between 1858 and 1899, those estates whose probate records showed at least £1 million in non-land wealth, a proxy for those who owned substantial business interests too, about one-third owned at least 2,000 acres of land. This earned them a spot in the fourth and final edition of John Bateman’s Great Landowners of Great Britain and Ireland, published in 1883. Among half-millionaires, about 26% owned 2,000 acres of land or more in the probated estates of 1858-79, declining to 20% among those in 1880-1899.

So, a large minority of the richest businessmen owned large landholdings. Still, land was not the destination of all or most of the retiring businessman’s wealth. Ownership of truly large tracts of land, 10,000 acres or more, were comparatively rare even if the most prosperous industrialists, bankers, or others could theoretically afford to buy this much land. Nonetheless, it was exceptionally rare for the most affluent to convert a majority of their fortunes into land.

One study by Tom Nicholas (1999) suggests that valuing landholdings at thirty years’ purchase, or thirty times their annual rent income, the typical large landowning businessman kept just one-quarter of his wealth in land. In fact, this is only considering the businessmen who counted large estates among their assets; most businessmen owned no large estates at all. So, most wealthy people owned no land or held only a very small, perhaps negligible, part of their wealth in that form.

Still, while some minority of businessmen were becoming new landowners of note, the vast majority of large British landowners still came from old money, or at least had no particularly large business fortune or origin in any industry or trade. The three largest landowners in John Bateman’s 1883 survey were all aristocrats. Less than one-tenth of the largest landowners came from a business or professional background that made their money only after 1780.

Turn of the Century

The agricultural depression of the late 19th century dissipated in the last few years of the century. Transaction volumes bounced from 1895 to 1898, held at these somewhat stronger levels for a short while, but fell once more in 1903. Confidence in the security of a land investment had not recovered fully.

If there was some, though limited, truth to the assertion that large business fortunes were reinvested into land in the 19th century, it was the waning days of this practice. By the start of the 20th century, the tendency to convert fortunes into land had diminished. For one, land was no longer as exclusive a symbol of status as it once was; as just one signal of this, many new peerages at the turn of the century went to men with no landholdings. Other attributes like schools attended and education came to signal social class at least no less effectively.

Besides signaling status, the value of land as an investment also looked in doubt. Land values and rents had collapsed with the rural depression; it seemed that land no longer provided financial security. Higher estate taxes may have also made holding a relatively low-yielding asset like rural land a less appealing option for intergenerational wealth preservation. Some feared further anti-landlord legislation or further taxes, deterring the wealthy from buying land in the new century.

Lesson

The relative share of land in Britain’s wealth composition changed over the course of the 19th century. So too did the land buying habits of the wealthy. Through the mid-19th century, land was bought and sold at a premium because it conferred status. Prices were so high that it was truly difficult to cobble together landholdings to rival the largest aristocratic families. However wealthy an industrialist or financier got in this period, buying a truly massive portfolio of land to rival the wealthiest dukes or earls would have absorbed most of that wealth. In the end, few tried and even fewer tried with time. The social and economic value of land dissipated over the 19th century. Prices fell but so too did interest; the rush of new buyers enticed by low prices hardly came. Indeed, land came to be liquidated by the largest landowners at the turn of the century.

More from the Tontine Coffee-House

Read about the financial difficulties of a 19th century aristocrat, Richard Plantagenet Temple-Nugent-Brydges-Chandos-Grenville, the 2nd Duke of Buckingham. Also, consider how the well off in France invested their wealth over the same period. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.