Tuesday, 2 February 2016
Rural land prices in Scotland fall as demand declines
• Scottish rural land prices expected to fall throughout 2016
• Average price of rural land in Scotland dips to £3625 per acre
• Demand for land decreasing across the UK
Scottish rural land prices fell in the latter half of 2015, according the latest survey by the Royal Institution of Chartered Surveyors (RICS) and Royal Agricultural University (RAU).
[Pictured: Sarah Speirs, Director RICS in Scotland.]
The average price of rural land fell to £3625 per acre during H2 2015, compared with £4375 per acre for the same period in 2014.
An excess of supply over demand drove the decline in prices during the second half of 2015. Indeed, a net balance of 67% of chartered surveyors reported a fall in demand for rural land across the country while availability increased with 83% of respondents reporting a pick up.
As a result, survey respondents have this year predicted that Scottish land prices will fall over the next 12 months, with a net balance of 67% of rural chartered surveyors expecting to see prices drop.
Sarah Speirs, Director RICS in Scotland, commented: “Rural land prices have increased in Scotland over recent years. However, the latter half of 2015 saw prices and demand fall and the global fall in crop prices is likely to cause values to continue to decline over the next 12 months.
“Additionally, with commercial and residential property prices in towns and cities continuing to rise, this is likely to make rural land increasingly attractive to those outside traditional farming communities. We are already seeing growth in countryside land in Scotland being purchased by non-farmers – lifestyle buyers or hobby farmers.”
Across all farming sectors, demand for rural land is expected to fall over the next twelve months. While in the last half of 2015, the only areas where demand for land grew were the North East and South East of England.
Land yields remained relatively stable over the second half of the year at 1.8%, from 1.7% previously, while arable and pasture land rents fell by 4.5% and 4% respectively over the course of the year.
Bob Cherry MRICS, CKD Galbraith (pictured above) commented: “Lower commodity prices have reduced the demand for livestock and bare land in the West of Scotland and lower land prices are following.”
Elsewhere in the UK non-farmers, such as those starting-up cottage industries, accounted for around 25% of rural land sales over the past six months. This figure was up from just 18% in the first half of 2015, according to the RICS/RAU Rural Land Market Survey H2 2015.
By contrast, property developers accounted for only 1% of rural land sales over the same period, falling from 3% in the first half of the year. Meanwhile, sales to industrial farmers declined from 62% to 57%.
RICS Head of Policy, Jeremy Blackburn said: “Start-up businesses do not have to be confined to the trendy streets of East London, Britain’s countryside has a great deal to offer young entrepreneurs. Market conditions appear to be encouraging a wave of new types of rural business, and help must be given to support this trend further if our countryside communities are to thrive.
“Land entrepreneurs are playing an increasingly active role in the rural market, representing around 25% of all purchasers at a time of increased volatility in the farming sector.”