LAST year’s record low supply of Scottish farmland will almost certainly be topped in 2020.

The combination of Brexit, agricultural policy reform and the Covid-19 pandemic weigh on the market but, according to Savills latest research, despite this uncertainty Scottish farmland values have remained strong with more deals being done privately, highlighting the underlying confidence in rural investments and the ongoing resilience of the sector.

Savills say only 95,160 acres had been publicly brought to the GB market as of September 30, with half of this between July and October, continuing the momentum seen in June as the market emerged from lockdown. In Scotland the supply of publicly advertised farmland was 58% down on the five year average to the end of September, to only 14,663 acres.

However, although the statistics continue to show a dramatic fall in the supply of acres being offered for sale on the open market, Savills head of rural agency in Scotland, Evelyn Channing, said there was more transactional activity in the Scottish market than these statistics suggest.

Ms Channing said: “While publicly marketed supply does remain at an all-time low, privately advertised and off-market sales have been an alternative avenue to sale for some vendors.

“The results reveal a continued appetite from farmers for quality land and well equipped units. In addition there has undoubtedly been a shift in sentiment towards rural living as a result of Covid-19 with a remarkable uptick in interest for houses in the country and amenity farmland as urban-based buyers seek more green space away from major centres. Indeed, Scottish farms, both large and small, look set to continue to attract buyers from all over the UK. Meanwhile, rural estates with notable residential components are also attracting interest at the higher end of the market.

The south-west of the country has seen the most buoyant market in Scotland since the sector reopened. Savills rural agency expert in Dumfries, Sian Houston said: “Generally, farming buyers are investing in order to expand existing enterprises, or to relocate to larger or better equipped farms.

“There is significant demand for marginal land, from both farming and forestry buyers, which is creating competition and pushing prices upwards. Everything is generating interest, from small parcels of bare land and farmhouses with a few acres to larger commercial farms. This market is driven by key factors such as the value for money on offer in the south-west, the demand for these properties outweighing supply and its comparatively temperate climate making it popular to both farming and forestry interests.

“In addition, as a result of the pandemic demand has been further boosted by the surge of buyers from urban areas who are looking for a change of lifestyle.”

The Savills Farmland Values Survey shows market resilience, with minimal changes to the end of September 2020.

Savills rural researcher, Angus Locke, said: “Farmland values have been relatively static over the past 18 to 24 months with lower transaction volumes providing less market evidence and volatility in pricing. In reality, values achieved remain highly localised and primarily driven by location, asset quality and soil type.

“Looking ahead, trade and policy reform are expected to develop in detail before the year end. The sector is set for radical change, however we expect the demand fundamentals to remain strong and the market steady with such low supply.

“Volatile stock markets and the recent inflation of gold prices highlight the current uncertainty across investment markets, as the financial ramifications of the pandemic continue to emerge. Farmland however, both here and globally, has shown resilience throughout this period, with business interruption limited and stability in capital values," said Mr Locke.

“Times of economic uncertainty have proven fruitful for farmland investors and our analysis shows in the seven years following the global financial crisis, farmland outperformed UK equities, gold and bonds.

“As investors revisit portfolio allocation over the coming months and years, the appeal of uncorrelated and inflation hedged alternative assets like farmland may be bought into focus. Momentum behind a ‘green recovery’ is likely to complement this, as society and governments recognise the importance of the land based sector in mitigating the effects of climate change.”