The most recent RICS Rural Land Market Survey, which relates to the first half of 2016, has reported a fall in demand for commercial farmland with a subsequent decrease in value. As has been highlighted recently within the Scottish Farmer, the reason for this trend is thought to be increased uncertainty within the economy which has been exacerbated by the Brexit decision.
The RICS survey however covers the whole of England, Wales and Scotland and it appears that average land values, within Scotland alone, appear to have remained fairly static over the last 12 months or so. It is likely that the main reason for this is the continued lack of land being exposed to the market and demand exceeding supply. Certainly there appears to remain demand for East Coast arable farms, in particular, with a number of good sized units currently under offer and proceeding towards sale. There appears to be less interest in livestock and dairy farms, which are generally taking longer to sell, and this is likely to be the result of continued low prices being paid for produce and its effect on profitability.
It appears that with cereal prices being only slightly above the cost of production, arable farmers are frequently choosing to expand their acreages and spread their fixed costs over a greater area in order to improve their gross margins. As there is only a certain amount of good quality arable land in Scotland, and only a very small amount of it being offered for sale each year, farmers are competing to buy it, which is maintaining the average price per acre at a relatively high level. In addition there remains interest from non-farming investors in Scottish farmland who still see it as a secure long term investment, which may well make a more profitable return than other investment schemes. This adds to the competition and demand for farms.
We specialise in the valuation of farms and rural property located all over Scotland. If you require any assistance in this regard, please get in touch.