The Courier & Advertiser (Angus and Dundee)
Demand strong as land supply down
A40% reduction in the supply of farmland for sale in Scotland this year, compared to prepandemic volumes, has drawn buyers from far and wide to view the limited number of acres available, according to leading property agents Savills.
In addition to the supply shortage generating rapid demand from potential buyers, the tightening of purchasing opportunities has created a challenge for farmers sitting with rollover funds to invest.
“Roll-over buyers have often been ‘top of the pops’ at closing dates this year,” said Evelyn Channing, Savills’ head of rural agency in Scotland, adding that this reflected their keenness to take advantage of current capital gains tax reliefs.
“If we were to remove this roll-over interest from the equation, we might begin to see some downward pressure on values to reflect the higher costs and uncertainty from which the agricultural sector is suffering (like many others).”
Pointing out that many of those with roll-over funds have already benefitted from strong prices being paid for planting land, Ms Channing said there is some evidence to suggest that the planting market is beginning to cool.
“Some planters are now carrying a bank of land and are ready to enter the planting application process,” she said. “Others are adjusting their financial modelling based on recent changes to interest rates.”
As for the reason behind the 40% slump in farmland for sale, she highlighted the fact that farms were getting bigger and that, by definition, the number of farmers in the market was reducing.
“The volume of farms coming to market is therefore naturally
declining,” she said. “In addition, low interest rates in the past and the fact that farming has been OK, has kept the market quiet. There are also obvious inheritance tax benefits from owning land, which adds to the incentive to keep farming long-term.”
Even with interest rates now rising, Ms Channing said most farmers would stay with their businesses, largely based on the reality that we all need to eat food and that farming will always be central to that requirement.
“As for interest rates, when I started at Savills rates were on 18% so, while it is shocking for some to see rates rising now, there are plenty of farmers around who will be prepared to weather the current storm.”
Another emerging trend in today’s farmland market is the increasing number of livestock farmers who are seeking to become more self-sufficient, rather than needing to buy expensive feed.
“As such, a number of larger livestock farmers have sold hill ground and are now looking to reinvest in additional productive low ground acres to produce their own feed and straw,” said Ms Channing.
“The radius search for such a unit from the home farm has also become very much greater than it once was, again reflecting the scarcity of land for sale”.