Supply of farmland across Scotland increases sharply

An increase in the supply of farmland coupled with a tailing off in demand growth across Scotland has resulted in a significant reduction in price growth expectations, according to the latest Royal Institute of Chartered Surveyors’ rural land market survey for the first half of 2015.

Anecdotally, good arable farms in the east of Scotland have been selling strongly but the RICS survey, which covers the whole of the country, tells a different story.

Fundamentally, the supply of farmland in Scotland has increased sharply during the first six months of 2015, reversing last year’s decline.

Furthermore, RICS members have noted an easing in demand for both commercial and residential farmland for the first time since 2012, with the survey suggesting the outlook for price growth over the coming 12 months being “considerably more subdued”.

Demand from “lifestyle buyers” also appears to have stalled, as a net balance of33% of respondents reported a decline in demand for residential farmland.

Despite this, price expectations remained steady, with 17% of respondents expecting the price of residential farmland to continue to rise over the year to come.

Sarah Speirs, director of RICS in Scotland, said: “We are seeing a decline in demand growth for commercial and residential farmland, this is teamed with a growth in available land across Scotland.

“Anecdotal evidence suggests the recent falls in commodity prices are the primary cause of this decline, with CAP reform also impacting the sector.

“Despite the reduction in demand, longer term price expectations for the lifestyle market remain relatively strong, with prices of land with a large residential component generally expected to continue moving higher.

“However, market conditions look set to remain challenging.”