NEW RURAL property market figures indicate that average farmland prices remained 'remarkably' resilient in 2020, largely unaffected by the wider economic turmoil.

So much so that the new year has begun with more buyers registering an interest in acquiring Scottish farmland than 12 months ago.

Looking ahead, the Scottish head of rural for land agents Savills, Evelyn Channing, believes this fresh demand, backed up with accumulated funds of £830 million, should ensure prices stay firm for the foreseeable future: “While the combination of Brexit, agricultural policy reform and the Covid-19 pandemic weighed heavily on farmers the length and breadth of the UK, the Scottish farmland market showed considerable resilience throughout 2020, demonstrated by strong sales and with average land values (for all land types) being upheld.”

Savills' own research found that limited supply and an increasingly diverse pool of buyers, from ‘life-stylers’ to corporate ESG investors, resulted in average values across all land classes in Scotland increasing marginally to £4308 per acre in the 12 months up to December 2020, principally on the back of upland values showing an increase of 17.5%. Average prime arable values held steady at £7936 per acre.

The survey, which tracks sales over 50 acres, reveals supply of publicly marketed farmland fell by 57% on the five year average to about 17,600 acres in Scotland, a record low. However, these figures mask the increased number of off-market and privately marketed transactions, highlighting the underlying confidence to invest when the right opportunities present themselves.

Ms Channing said: “Lifestyle buyers emerged as a standout feature of the market last year – the experience of lockdown has brought an apparently insatiable demand for more living space and the great outdoors, broadening the potential purchasing base for those farms offering residential and amenity appeal.

“Meanwhile, the seemingly limitless demand for land suitable for commercial tree planting continues to push values significantly upwards, with forestry buyers in some cases bidding up to three times more than a farming buyer.”

Neither has the pandemic stalled the environmental, social and governance agenda, the driver for a growing number of new buyers in the market.

Ms Channing explained: “ESG buyers are attracted by the ‘natural capital’ on offer and the prospect of eco-system services or carbon credits providing a financial return or an environmental benefit from their investment. There are also those companies looking for opportunities to offset carbon emissions as part of their corporate responsibility. Scotland is one of the very few places in the UK where opportunities for commercial or native woodland planting or eco-system services can be delivered at any meaningful scale. Some upland farms are being re-purposed for these very reasons.”

According to the Savills survey, the fundamentals that have historically underpinned the sector’s performance – namely shortage of supply and demand from competing land uses – are only likely to strengthen.

She concluded: “Whilst it is difficult to predict where land values will go in the longer term, it is clear that competitive closing dates and premiums are both features likely to be seen for best-in-class properties, smaller farms of residential and amenity appeal, and tree planting land.

“The majority of our commercial farm sales in 2020 were driven by the desire to expand. However until such time as greater clarity is given on the future policy framework, farmers are likely to be selective with any purchases unless stimulated by golden opportunities which may present themselves.

“While our researchers are not anticipating a repeat of the significant price increase recorded in the decade to 2014, we do expect a return to historical real-term growth of just over 1% per annum in the medium to long term.”