Pick-up in supply of farmland across Scotland as demand dips -RICS

An increase in the supply of commercial farmland coupled with a tailing off in demand growth across Scotland has resulted in a significant reduction in price growth expectations, according to the latest RICS/ RAU Rural Land Market Survey H1 2015.

Meanwhile, demand from ‘lifestyle’ buyers also stalled, as a net balance of 33 per cent of respondents reported a decline in demand for residential farmland. Despite this, price expectations remained steady, with 17 per cent of respondents expecting the price of residential farmland to continue to rise over the year to come.

During H1 2015, a net balance of 50 per cent of respondents reported an increase in the supply of commercial farmland while demand for these blocks declined, albeit very modestly, for the first time in Scotland since 2009. Scotland and the North East of England saw a reduction in demand not just for commercial but also residential farmland, while the results for South West and the East Midlands suggests demand is still edging upwards in these areas.

Sarah Speirs, Director RICS in Scotland, said: “We are seeing a decline in demand growth for commercial and residential farmland, this is teamed with a growth in available of land across Scotland. Anecdotal evidence suggests the recent falls in commodity prices are the primary cause of this decline, with CAP reform also impacting the sector.

“Despite the reduction in demand, longer term price expectations for the lifestyle market remain relatively strong, with prices of land with a large residential component generally expected to continue moving higher. However, market conditions look set to remain challenging notwithstanding the outcome with the global economic environment set to remain a drag on commodity prices.”

Across the UK, the headline transaction based measure of farmland prices fell by 2.5 per cent during H1 2015 and by 1% over the course of the year to reach £9692 per acre. Average rents also slipped during the first half of the year both for arable and pasture land, reflecting the weaker to many commodity markets.

Harry Lukas MRICS, CKD Galbraith, added: “In the Borders there remains a strong general inherent demand for farmland, however, confidence in commodity and stock prices has weakened, making the current viability of a purchase more of a key decider than in the past.”