A report commissioned by the Scottish Land Commission has summarised recent trends in the rural land market in Scotland. The report was compiled by Scotland's Rural College in partnership with Savills and Strutt & Parker, and with support from the Royal Institution of Chartered Surveyors.
The Rural Land Market Insights Report is the first stage in a two stage research project aimed at improving reporting on the land market in Scotland. The second stage of the research will involve collating data from land sales from Registers of Scotland and land agent firms on recent land market sales and values.
What was the remit of the report?
The report presents findings from a desk based review of existing public information on land market activity and from 18 interviews with land agents operating in the sector, including Savills, Strutt & Parker, Retties, Galbraiths, Davidson & Robertson, Landfor, Goldcrest Land & Forestry and John Clegg.
The stated aim of the report was to analyse and report on the current pattern of activity within the rural land market and provide a picture of buyer and seller motivations, with a specific focus on how increased demand for natural capital investment is driving activity in the land market.
The report highlights however that the number of "off market" deals in Scotland means that there is a degree of uncertainty in relation to the assessment of activity.
What are the key trends identified?
The report identifies three areas within the land market – farmland, forestry and estates – and sets out findings in respect of each area.
- The value of farmland increased by 31.2% in Scotland in 2021 (compared with overall increase in the UK of 6.2%). The average price per acre in Scotland was £5,920;
- Land quality is no longer the key determinant for land values. Instead, natural capital and forestry potential is an "increasingly critical" driver of demand due to timber prices, forestry grants and carbon markets; and
- Farm buyers are being "frequently outbid" for plantable ground by forestry investors, with the value of poor livestock land in Scotland having risen by 60% in 2021 (compared with increase of 17.5% in 2020).
- The total investment in estates in Scotland was £247 million in 2021 (a 119% increase against the investment in 2020 of £112 million);
- Average price of a Scottish estate in 2021 was £8.8 million (an increase of 87% against the 2020 average of £4.7million); and
- Opportunities relating to natural capital are an increasingly important driver for estate acquisitions, including carbon offsetting, afforestation, renewables and rewilding.
Forestry and Plantable Land
- UK forestry market has experienced "exceptional recent growth", with total recorded investment in the UK of over £200 million in 2020 and 2021 (compared with £104 million in 2018 and £127 million in 2019). The average sale prices in the UK exceeded valuations by around 50% in 2021. Scotland provided 76% of the UK commercial forestry land market in 2021;
- Scotland accounted for 62% of plantable land sales in 2021, and experienced the sharpest increase in values (54%) against 2020 values. Average value per acre in the UK for plantable land of £8,500 in 2021 (compared with £6,200 in 2020); and
- Whilst the carbon market and the ability to trade carbon through the Woodland Carbon Code influence the acquisitions of plantable land, the investment potential in forestry and timber markets are more important drivers. Emergence of carbon markets, coupled with timber market and policy drivers means that growth in forestry and plantable land prices look set to continue.
What is the likely impact of the report?
The report states that it will serve to expand the evidence base for future policy development relating to regulation and governance of land markets, as well as policy development relating to natural capital markets.
It is interesting to note that the statement made by Hamish Trench of the Scottish Land Commission to accompany the report makes reference to shaping the land market in "the public interest". This is consistent with one of the three recommendations which the Scottish Land Commission made to the Scottish Government in relation to concentration of land ownership – the public interest test for significant land acquisitions. Whilst there has not been any indication from the Scottish Government that it is considering widespread regulation of the operation of the land market, the Programme for Government confirms that it is seeking to introduce the public interest test.
Hamish Trench's statement also makes reference to the need for a joined up approach in policy. It is clear from the report that the Scottish Government's policy in relation to forestry (including planting grants and favourable tax treatment) has had a determining role in the shaping of today's rural land market. No doubt the detailed policies relating to natural capital will also have a key role to play as they emerge and develop over time.