A groundbreaking report involving the SRUC reveals changes in the market and values of rural land in Scotland, amid high timber prices and growing demand for non-farm leisure areas.
The report, which was published by the Scottish Land Commission, shows that the Scottish rural land market is characterized by exceptionally high demand but still low supply, leading to rising values.
The Rural Land Market Outlook Report found that non-farm investors are playing an increasing role across the land market and that there is increased demand for small farms as lifestyle and business operations. the share of companies and investors interested in plantable land and forest exploitations.
The report was compiled by SRUC in partnership with land agents Savills and Strutt & Parker, with support from the Royal Institution of Chartered Surveyors (RICS).
It draws on published market information and interviews with industry experts, to provide a current picture of buyer and seller motivations, to better understand the land market and what drives it.
The report found that the growing role of non-farm investors has led to an increasing influence of land values by the long-term investment potential and environmental, social and governance (ESG) considerations of companies.
With farmland values increasing by 31.2% in Scotland in 2021 compared to 6.2% in the UK.
There has also been a marked change in the types of buyers, with almost half of all estates bought in Scotland in 2021 sold to corporate bodies, investment funds or charitable trusts – driven by the potential for carbon offsetting and development of large-scale environmental improvements.
Off-market sales account for a growing share of land market activity, according to the report, with up to one-third of agricultural, forestry and plantable land off-market, reaching almost two-thirds of real estate sales.
The trend of off-market sales may exclude some buyers and limit access to land for individuals, communities and businesses, raising questions about land market transparency, which the report says could further strengthen the model of land ownership concentrated in Scotland.
The report acknowledges that there is an element of speculation in the land market as investors seek a safe haven in a turbulent global economy and bet on future increases in carbon values.
Strong growth in land values is expected to continue due to continued low supply and strong demand, high levels of private wealth and corporate interests seeking land, long-term politics term on climate change and growing pressure on global timber markets and food supply chains.
In the Scottish property market there has been an estimated 87 per cent increase in prices paid in 2020, and last year two properties sold for over £20million, while five sold between 10 and 20 million pounds sterling.
Echoing the national trend, 64% of successful property sales were off-market, up from 33% in 2020, and around a third of buyers came from overseas.
Dr Rob McMorran, rural society researcher at SRUC and co-author of the report with Jayne Glass and James Glendinning, said: “This report brings together evidence on current land market activity in Scotland and has shown that capital nature and particularly investor interest in carbon, has led to growing market interest in Scottish estates in recent years due to their restoration potential, particularly from corporate buyers.
“At the same time, driven by net zero commitments, reforestation policy and strong timber markets, we are seeing growing interest in forests and plantable farmland from forestry investors across Scotland, and a general recent trend of rapidly rising land values and increasing levels of off-market land sales due to limited supply and high demand.
“These market changes have broader implications for access to land as a resource and for broader land use change, but the resulting changes in ownership may also represent opportunities for the creation of forests and longer-term ecosystem restoration.”
The second phase of the Rural Land Market Outlook report will provide baseline data and a proposed approach to improve future market reports.