Arable land values in Scotland continued to rise in 2023 however there was a noticeable shift in prices being paid for farmland suitable for afforestation, according to Strutt and Parker.
Over the past 12 months, the Scottish farmland market performed well, despite higher interest rates, poor weather and lack of clarity about the future of farm support.
The average value of prime arable land on the east coast of Scotland is estimated to have increased to approximately £10,000 per acre, compared with an estimated £9,500 per acre in 2022.
However, the price of upland pasture suitable for afforestation fell back as forestry investors became more selective.
Douglas Orr, farm agent for Strutt & Parker in Scotland says: “Generally, land values have increased in, albeit by a smaller amount than in previous years.
“The main exception is areas suitable for afforestation, where in some instances, the prices offered were 40% lower than those seen at the peak of the market.”
The average value of land suitable for tree planting is currently around £3,500-£4,000/acre, compared with £5,500/acre in 2022. However, such land still commands a premium above traditional agricultural values.
A total of 26,200 acres came on the open market in 2023, down 36% on 2022 levels but only 7% below the five-year average.
Mr Orr says demand has been good, with arable and mixed farms the most sought after.
He added that farmers continue to be the main buyer of farms and farmland, which contrasts with England where non-farmers accounted for more sales than farmers in 2023.
“The majority of buyers are farmers looking to expand their acreage, reinvest profits and improve their farming businesses,” said Mr Orr.
“However, agricultural land does continue to be perceived as a safe investment for other investors for tax, capital growth, amenity, lifestyle and environmental reasons.”
Looking ahead, Strutt & Parker says higher interest rates have inevitably resulted in a cooling of demand and forced some buyers to pull out of purchases because they can no longer afford to service the debt.
“We also know there is a considerable pool of cash buyers – including farmers – who are keen to buy land. However, overall, our expectation is that the market will continue to contract in 2024,” he added.