DEMAND for rural land has fallen sharply in the past six months and prices are also expected to fall – and the uncertainty sown by Brexit is to blame.

That is the grim story being told by the most recent Royal Institution of Chartered Surveyors/RAU rural land market survey, with respondents indicating that increased uncertainty in the wake of the EU referendum and the subsequent confusion over the future of CAP payments, and low commodity prices, are denting confidence in the value of farm land.

Commercial farmland has seen the worst of the current downturn, with demand falling most substantially in this sector, but residential farmland also saw a sharp drop in buyer interest. The expectation is that commercial farmland will continue to see problems in the coming year, while there is a mixed outlook for residential land.

RICS senior economist Jeff Matsu said: “Commodity price volatility was already negatively impacting sentiment in the rural land market prior to the EU referendum, and the outcome of the vote has added further uncertainty. For now, this appears to be weighing heavily on demand and prices have begun to slide.

"Nevertheless, going forward, at least some encouragement can be taken from the potential for the Bank of England’s monetary policy stimulus to support activity. In addition, the fall in sterling should prove beneficial to agricultural exporters and farmlands’ safe haven status may attract long term investors, particularly for prime holdings.”

RICS head of policy Jeremy Blackburn added: “EU subsidies play a role in propping up the profitability of many UK farmers and landowners, and anecdotal comments from survey respondents have highlighted the impact that uncertainty surrounding CAP related payments has had on the market.

"The Chancellor’s announcement last weekend that the Common Agricultural Policy (CAP Pillar 1) will be upheld until 2020, and agri-environment schemes agreed before the Autumn Statement will be protected, will be welcomed. The Government’s two or three year safety net was announced after our survey was closed, and, it remains to be seen how the rural land market will perform in light of these medium term measures.”

Playing down the matter, Luke French of land agents Savills said: "Most of the questions surrounding Brexit and its impact on the UK remain unanswered and will do for some time, but our analysis to date suggests there has been very little impact on the farmland market in Scotland. We continue to see farms going under offer at competitive closing dates and an encouraging numbers of enquiries from north and south of the Border. Both value and scale are currently greater drivers than politics in buying decisions in Scotland.

"In Scotland 25,200 acres of farmland were marketed during 2016 (to end June) compared with 20,400 acres in 2015 (to end June), an increase of 23%," he noted. "This compares with an increase in supply across Great Britain of 1% (England -10%) for the same period. Scotland accounted for 20% of the farmland marketed in Great Britain during 2016 (to end June).

"Our Farmland Value Survey shows that the average value of prime arable land in Scotland remained stable at £7940 per acre in the first half of the year. This compares with an average decrease across Great Britain, for prime arable land, of -1.7% (to average £9320 per acre) for the same period."