Prices increased on average by 7% to £4,262 an acre in the latter half of the year and overall, values rose by 11% during the year.
This takes 10 year growth to 220%, and means for the first time that the value of Scottish farm land has outpaced the rise in the price of land England. It also puts land in Scotland ahead of gold which rose by 212% over the same period.
James Denne, head of farm sales in Scotland, said that there is still confidence in the farming sector from both investors and agricultural businesses.
‘Although farm profitability undeniably fluctuates in line with commodity prices, the value of the underlying asset, land, has continued to rise steadily and hasn’t exhibited any of the volatility shown by other asset classes, such as gold. This is important because it gives banks the confidence to keep lending to the sector,’ he explained.
The result is a lot of interest when properties with land come onto the market. Denne gives as an example a livestock unit in Dumfries and Galloway which was launched last autumn.
‘We have had a lot of enquiries from farmers, mostly Scottish, but also some from England, looking either for a stand alone unit or as an addition to their current holdings. Interestingly, one prospective buyer was also considering returning it to a dairy unit, which suggests that confidence in milk production is returning,’ he said.
There was also competitive bidding for two 110 acre blocks of arable land in Fife that fetched between £7,000 and £8,400 per acre for which there was strong demand from farmers.
However, according to Michael Ireland, head of Scottish farm valuations at Knight Frank, not all sectors of the market are growing at the same rate.
‘There is definitely continuing strength in the arable sector, particularly for the best soil, but a softening of growth in the more marginal stock and grassland areas is giving rise to a more diverse market, both geographically and between productive types within the same locality,’ he said.
He pointed that this is confirmed by the results of the Knight Frank index when broken down by land type. In the second half of the year the average value of prime arable land and average arable land rose by 10% and 7%, respectively. Improved permanent pasture and hill ground rose by 4% and 2%.
Ireland said that this could be partially due to the higher levels of uncertainty regarding the future level of subsidy payments for livestock farms under the latest round of CAP reform.
