Investors in farmland may show limited interest in full-price arable agricultural properties, but that hasn’t stopping its value from doubling in the last five years. Knight Frank reports that the prices of prime arable land have risen 3% in the first quarter of 2012 to £7,053 an acre, while grassland is fetching £3,600 an acre. Hill land has improved in price, too, although uncertainty in renewable energy payments is helping to cool the market. Even so, many investors are interested in more reasonably-priced hilly tracts to use for starting commercial forestry projects. For more on this continue reading the following article from Property Wire.
The average value of Scottish farm land has almost doubled over the past five years, according to the latest Knight Frank Scottish Farmland Index.
Top quality arable land is now worth just over £7,053 an acre, with ploughable grassland at £3,600 an acre and hill land at £614 an acre.
Farm land values rose by 3% on average during the first half of 2012, slowing slightly in the second quarter of the year with prices increasing by just 1% but the prediction is for further growth in values of 3% over the next 12 months.
‘People are still positive about farmland, but they are being slightly cautious at the moment. North of the border we tend not to see as much activity from investors as in England. Most of our buyers are farmers and they take a fairly canny view when it comes to buying more land. Anything that is too fully priced runs the risk of attracting limited interest,’ said James Denne, head of farms sales in Scotland.
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‘I think if investors were aware of the quality of some of the arable land here and the strong demand to rent or contract extra ground they might be looking further north. Every time I put a farm on the market I always get plenty of phone calls from neighbouring farmers or contractors looking to spread their fixed costs,’ he added.
Farms that are correctly priced are attracting a lot of interest. ‘Despite the weather, we had seven viewings the week after we recently launched Upper Huntlywood, a 690 acre Borders arable and stock farm priced at around £4,000 an acre for the land,’ Denne explained.
A 316 acre stock farm in Dumfries and Galloway has also just attracted offers over its guide price, despite the continued absence of buyers from both sides of the Irish border who were significant purchasers of farms in the west of Scotland before the credit crunch curtailed their spending power.
Michael Ireland, head of rural valuations in Scotland, who has valued a number of wind farms, said that he is often asked if the increase in the number of upland wind farms is having an impact on values. But so far there is no evidence that this is happening.
‘At the moment it is woodland not wind that is driving demand for Scottish hill land. Uncertainty over future renewable energy payments and the time taken to get planning permission means there is very limited speculative demand for land for wind turbines,’ he said.
‘By contrast, there is still a lot of demand for hill land suitable for tree planting, either for commercial forestry or to re-establish native woodland habitats. An added bonus is the ability to sell carbon credits that organisations can use to offset their CO2 emissions,’ he added.
Looking forward, the Knight Frank Scottish Farmland index predicts further growth in values of 3% over the next 12 months. As well as strong demand, a dearth of good farms for sale is likely to support values.
Knight Frank is about to launch a 1,300 acre stock farm in the Tweed Valley, near Melrose, in the Scottish borders that it believes will be a good test of the market.
This article was republished with permission from Property Wire.