Scottish farmland continues to rise in value and outperform other asset classes
Date : 08 July 2010
Key Points
- Scottish farmland has continued to gain in value over the past five years while other asset classes have been hit by the credit crunch
- Farmland prices have risen on average by 148% in the past five years and 8% in the past six months
- A shortage of supply and strong demand has helped to push up prices
- Good arable land is now worth £6,000/acre on average
James Denne, head of farm sales, Knight Frank Scotland, commented:
“The value of Scottish farmland continues to perform strongly and, as the graph below clearly shows, it has proved far more resilient during the recession than other asset classes.
“A shortage of supply and continued strong demand means values have risen by 8% so far this year. They are now 148% higher than they were five years ago. Houses prices, meanwhile, have risen just 1% this year and the sharp downturn during the credit crunch means that, along with the FTSE 100 index of leading UK shares, they are only slightly higher than they were in 2005.
“In times of economic turbulence farmland is viewed as a safe investment compared with other investments such as equities and hedge funds, which exhibit a much greater degree of volatility. Unlike in the residential and commercial sectors, banks have also continued to lend to farming businesses looking to expand, confident that there is a secure asset to back up their loans.
“Good arable land is now worth on average £6,000/acre and we actually achieved more than this with the recent sale of 415 acres in the Merse, in Berwickshire. The land was guided at £6,000/acre, but was bought for significantly more by a Scottish farmer.
“Over the past five years pastureland has shown particularly strong growth in value. This is mainly due to the change in farm support payments. While the old IACS system favoured arable land, the Single Farm Payment offers more generous support for livestock enterprises..
Average Scottish farmland prices 2010 (£/acre)
|
Good arable
|
Average arable
|
arable/grass
|
Permanent Pasture
|
Hill
|
|
£6,000
|
£4,500
|
£3,500
|
£2,500
|
£500
|
Scottish farmland performance by type
|
|
Good arable
|
Average arable
|
Arable/grass
|
Permanent pasture
|
Hill
|
Average (unweighted)
|
|
1 year
|
14%
|
6%
|
0%
|
14%
|
5%
|
8%
|
|
5 year
|
114%
|
91%
|
133%
|
317%
|
82%
|
148%
|
“Much of the demand for land is from Scottish farmers with some interest from south of the border. We are still seeing some enquiries for arable land from Irish farmers, but stock and dairy farmers from across the water, who were big buyers before the credit crunch, are now rare bidders.
“Looking to the future there are no signs of a glut of Scottish farmland that could push down values. I do, however, think that the market may start to flatten as low agricultural commodity prices, particularly in the arable sector, put pressure on farm incomes. The new era of enforced austerity following the recent emergency budget could also impact on sentiment.
“On the positive side though, the Chancellor didn’t touch the valuable tax reliefs, such as Agricultural Property Relief, that add to the attraction of farmland ownership. The increase in Capital Gains Tax to 28% was also far lower than some had predicted, while the increase in Entrepreneurs’ Relief from £2m to £5m means many farmers will escape the CGT net entirely. For married couples farming together the relief effectively rises to £10m, making it a very valuable tax planning tool.”
For further information, please contact:
James Denne, head of Scottish farm sales, Knight Frank,
Davina Bell, residential press manager, Knight Frank,
Ends
Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 207 offices, in 43 countries, across six continents. More than 6,770 professionals handle in excess of US$700 billion (almost £355 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the company, please visit www.knightfrank.com.