The Rettie Ruminant—January 2019
The Rettie & Co. Farmland Market Review—Spring 2019
Capital value growth remained muted during 2018, which has led to a somewhat cautious near-term outlook for farmland values. In spite of this, it is apparent to us that the market continues to grow more polarised between high quality land in good locations and lower grade farmland. The former is heavily sought after and achieved record prices last year in Angus and East Lothian, whilst conditions across the latter prove more challenging. About 50,000 farmland acres were marketed in Scotland during 2018—more than at any point in the previous 10 years—and whilst there was demand for most farms, it was the prime arable units and farms with diversified incomes that were particularly sought after. Indeed, despite there being a 40% increase on the 2017 supply of farmland acres, the number of larger units has been thin with less than 20% of farms sold last year being over 500 acres. This strengthened the demand for ring fenced, commercial farms and in doing so, helped preserve values but for the best arable units in the eastern counties where competition between English buyers and established local farming businesses was intense, some very high £/acre prices were achieved.
Probably the biggest factor to contribute to the increased supply is the corresponding demand for hill farms and bare land with the potential for afforestation. A number of significant players in the UK forestry sector have paid strong prices for otherwise marginal farmland and as the Scottish Government seeks to increase the annual woodland creation target of 10,000 hectares (ha) per year to 15,000 ha by 2024/25, it is the ambitious growth of this sector that provided some ballast to the lower end of Scotland’s farmland market in 2018 and is set to be a big factor in the years ahead.
During a delicate year for farming businesses that mingled political and economic uncertainty with unhelpful extremes of weather that deeply impacted yields, prices, and productivity, the farmland market performed well and we expect this to continue in 2019. At the time of writing, the effects of the Brexit merry-go-round are unknown and it would neither be prudent nor helpful to predict the outcomes. However, what Rettie & Co. can assert from discussions held with our retained buyers and existing clients is that the ‘unknowns’ are not affecting their appetite to purchase land in Scotland and they remain actively looking for opportunities.
Despite the uncertainty, demand continues to outstrip supply and for every farming business choosing to capitalise on over 15 years of capital growth in land values, there is another farming family looking to expand to achieve the necessary scale that is so required by the next generation. This, in conjunction with the continued purchasing power from England, where buyers are still able to achieve comparative value for money and scale north of the border; the incentives available for the growing forestry investment sector; and the presence of buyers with rollover relief requirements, provides a favourable outlook for the 2019 Scottish Farmland market and we are looking forward to making the most of the opportunities that present themselves for our clients.