Market Intelligence Report
Scottish land review 2012 Values continue to rise Amount of land for sale increases but is still low
Key points: •
The average price of equipped land in Scotland was £6,250 per acre, unchanged in 2012
•
Bare arable land values rose by 17% to £5,850 per acre
•
Bare grass land values rose by 1% to £3,450 per acre
•
Just under 35,000 acres were marketed in 2012, which is 19% more than in 2011
•
Sporting values remain steady
•
Continued demand for commercial forest plantations and land for planting
All figures in this review, from Smiths Gore’s research department, are from our comprehensive database of all sales of publicly marketed farmland in Scotland over 50 acres; they exclude sales where the residential value of the sale is greater than 50% of the total.
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Values continue to rise
The value of farmland has continued to rise in Scotland, driven mainly by some exceptional prices being paid (between £8,000 and £10,000 per acre) for smaller parcels of prime, bare arable land in East Lothian, Fife and Angus. Whole farm values have not risen at quite the same rate, held back by falling residential values and by the reduced development potential of redundant farm buildings. Prime arable land (Grade 3(i) and better) is averaging just over £6,500 per acre but the very best East coast land regularly exceeds £7,500 per acre. Less productive land and grassland values remain similar to last year, with prices typically ranging between £3,000 - £3,500 per acre. Upland and rough grazing values are being under-pinned by demand for tree planting land, with the Forestry Commission Scotland being particularly active in central areas, and values reaching £1,500 - 2,000 per acre.
2012 Acres Average price in Scotland - Equipped farms
Q1
Q2
Q3
Q4
£6,250
£6,250
£6,500
£6,250
% change since previous quarter
0%
0%
4%
-4%
% change since start of 2012
0%
0%
4%
0%
% change in previous 12 months
4%
2%
4%
0%
£5,000
£5,500
£5,750
£5,850
Average price in Scotland - Bare arable land - grade 3 % change since previous quarter
0%
10%
5%
2%
% change since start of 2012
0%
10%
15%
17%
% change in previous 12 months Average price in Scotland - Bare grass land - grade 3
11%
16%
15%
17%
£3,400
£3,500
£3,450
£3,450
% change since previous quarter
0%
3%
-1%
0%
% change since start of 2012
0%
3%
1%
1%
% change in previous 12 months
13%
9%
1%
1%
Land for sale in Scotland - Equipped farms
3,272
14,953
11,117
1,576
Amount for sale since start of 2012
3,272
18,225
29,342
30,918
% change in amount for sale since start of 2012 compared with 2011
143%
-3%
16%
18%
Land for sale in Scotland- Bare arable land
189
1,403
571
245
Amount for sale since start of 2012
189
1,591
2,163
2,407
% change in amount for sale since start of 2012 compared with 2011
n/a
274%
202%
190%
Land for sale in Scotland - Bare grass land
183
228
561
507
Amount for sale since start of 2012
183
411
972
1,479
% change in amount for sale since start of 2012 compared with 2011
-51%
-62%
-52%
-32%
Land for sale in Scotland - All land
3,644
16,584
12,249
2,328
Amount for sale since start of 2012
3,644
20,227
32,477
34,805
% change in amount for sale since start of 2012 compared with 2011
111%
0%
16%
19%
Low supply continues to drive prices up Supply Farms become available for any number of reasons, from farmers trading up or from those retiring but the standout reason at present is succession or lack of it. With no-one to take on the farm, sellers are taking the decision to sell now whilst prices are strong and we expect this trend to continue. Many of these farms are likely to be smaller, less viable units but lotting will provide neighbours with the opportunity to increase their existing holdings as well as attracting new entrants into farming. Just under 35,000 acres were offered for sale on the open market1 in Scotland, 19% more than in 2011 and the most for sale in the last five years. Details of some of the larger unit sales are yet to surface, but these are expected to show that average whole farm prices have not changed compared with this time last year. About 10% of the area for sale and a quarter of the sales were of bare land; this is similar to the average over the past five years so the market’s characteristics were normal. South Scotland was the most active region, both in terms of numbers of sales and area for sale.
2008 2009 2010 2011 2012
Number of sales Area (acres) Number of sales Area (acres) Number of sales Area (acres) Number of sales Area (acres) Number of sales Area (acres)
Total Number of sales Total Area (acres)
Aberdeen and North-East
Edinburgh and Lothians
Glasgow and Strathclyde
Highlands and Islands
South Scotland
Tayside, Central and Fife
Grand Total
15
2
21
5
29
20
92
2,937
492
6,482
2,219
12,098
7,202
31,430
13
4
37
4
22
23
103
3,222
817
9,327
1,012
4,633
5,851
24,862
25
4
28
6
29
20
112
5,015
350
4,987
1,312
8,555
5,119
25,338
16
5
27
10
28
23
109
4,693
1,192
5,085
2,452
10,233
5,620
29,274
18
8
28
10
32
27
123
5,077
4,024
5,748
3,332
9,282
7,342
34,805
87
23
141
35
140
113
539
20,944
6,875
31,629
10,327
44,801
31,134
145,710
But, despite being a more active year, the scarcity in the market can be seen when we look at sales by farm type. For example, only eight dairy farms were marketed, and six of them were in Glasgow and Strathclyde. Arable sales were concentrated in Tayside, Central and Fife. However, there were more large units for sale (5 sales, 6,486 acres), which is the most since 2008.
Arable Dairy Livestock Mixed
Number of sales Area (acres)
Aberdeen and North-East
Edinburgh and Lothians
Glasgow and Strathclyde
9
4
2
2,265
681
156
Number of sales Area (acres) Number of sales Area (acres) Number of sales Area (acres)
Total Number of sales Total Area (acres)
Highlands and Islands
South Scotland
Tayside, Central and Fife
Grand Total
1
15
31
97
3,775
6,974
6
1
1
8
1,672
153
590
3
1
15
8
21
4
52
272
79
2,828
2,934
4,502
1,129
11,744
6
3
5
1
9
8
32
2,539
3,264
1,092
245
4,092
2,438
13,671
2,416
18
8
28
10
32
27
123
5,077
4,024
5,748
3,332
9,282
7,342
34,805
Demand Farmers continue to be the proactive buyers in the market, with local Scottish buyers and near neighbours proving to be the strongest buyers. Significantly however, a greater number of buyers from England and from Continental Europe have been looking at Scottish farms, attracted by value for money – particularly on the high quality arable units. Scottish prices are 15-20% less than equivalent units in England. The Smiths Gore applicant data base shows that as well as the usual interest in smaller, lower value units up to around 250 acres or £1 - 1.5m, there is increasing demand over £2m (or 500+ acres). Despite more larger farms being for sale, it looks like demand will continue to outstrip supply. Inheritance Tax Relief continues to attract a significant number of non-farming buyers and for the first time in a long time we are seeing smaller private investment in land and buildings as a stabilizing factor to traditional investment portfolios.
1 All figures on the numbers and amounts of sales are from our comprehensive database of all sales of publicly marketed farmland in Scotland over 50 acres; they exclude sales where the value of the house and cottages is greater than 50% of the total.
Smiths Gore manages two million acres of land and estates in the UK and last year were the third largest sellers of land in England
9
15 16 14 17
4
Fochabers 10 11
7
5
12
Perth
13 Edinburgh
Haddington
1
Berwick upon Tweed 3
8
6 2
Dumfries
Smiths Gore offices Smiths Gore Sales
A selection of farmland sales in 2012 1
2
3
4
5
6
Tayinloan Killean is a superb income producing all round estate with magnificent house, farming, holiday letting business, forestry and sport with significant opportunity for renewable energy. 3684 acres. Price £7,500,000. Turnberry 495ac residential and agricultural estate with good sporting. SOLD by private negotiation at around £3,200 per acre. Kilmarnock A purpose built competition standard equestrian centre. UNDER OFFER at more than £2,000,000 asking price.
7
8
9
10
Loch Carron 272 acres of commercial forestry in a stunning lochside location. SOLD at closing date for around £1500 per acre. Stirlingshire A 400 acre livestock unit with significant amenity and hill grazings. Sold at around £3,300 per acre. Dumfriesshire A 590 acre former dairy farm with two houses and two good steadings. Sold over 10% above the asking price at around £4,750 per acre.
Perthshire A 635 acre mixed arable and livestock unit. Sold by private negotiation at around £3,650 per acre. Scottish Borders A 665 acre mixed arable and livestock unit. Well equipped with two good houses. Sold in August at around £5500 per acre. Elgin 150 acres of mainly Grade 2 arable land, with pumped drainage capable of growing potatoes, carrots and cereals. Sold in November at close to £7,000 per acre, which we think is a record for Moray. Forres A 350 acre well equipped Grade 4(2) livestock farm with some grade 4(1) and 3(2). Sold to the Forestry Commission Scotland in late 2012 at almost 10% over the asking price for £3,700 per acre. We acted for the seller.
11
Aberdeenshire A 245 acre moderately well equipped Grade 3(2) mixed arable and livestock farm. Sold in February for over £3,400 per acre.
12
Fife 495 acre arable land with planning for a new house with steading. Sold in December for around £6,000 per acre.
13
14
15
16
17
East Lothian A 190 acre block of prime arable land. Sold for around £10,000 per acre. Turriff 436 acres of commercial woodland with both vacant and leased land. SOLD in January 2013 for around £750 per acre. Banff A 130 acre residential farm with reasonable sized farmhouse and buildings. Sold in May 2012 for £4,600 per acre. Banff 235 acres of good Grade 3(2) land with a poor house and buildings. Sold in November after high levels of interest for 25% over the asking price at over £5,000 per acre. Mountblairy 272 acres of commercial woodland with harvestable timber. SOLD at closing date for £1911 per acre.
Forestry Market The market for forestry planting land and woodland plantation has been particularly buoyant in 2012. There has been strong demand for maturing high yield class forests in the south of Scotland, with prices ranging from £3,600 - 5,000 per stocked acre. Demand has also resulted in strong prices being paid for forests in Argyll and the North East. Values reduce with the lower growth rates and less easy access to markets associated with North Scotland and the islands, but where amenity remains high so does interest. There are some conflicting pressures on the market. With timber prices falling from the peak of early summer 2012, so forest values should stabilise. However, demand continues to outstrip supply and we think this will continue to put upward pressure on forest values in 2013. Forestry has continued to be one of the top-performing investment asset classes with a total return of 34.8% in 2011, which followed 20% in 20102. This is the best performance since the start of the IPD Forestry Index in 1992 and shows its attraction as a diversifier of risk within an investment portfolio.
Estate Market 2012 was defined by a lack of supply, with only 14 Scottish estates brought to the market compared with 21 last year. Using the loose description of ‘properties with a sizable house or lodge with more than 500 acres’, the Scottish Estate market can be split between ‘residential estates,’ with a significant country house, and ‘landed estates’, whose main assets are land, sport and amenity. The former have proved to be less popular this year as the market remains over stocked although there have been some excellent sales, including Blair Estate in south Ayrshire. The key has been realistic pricing. Landed estates with top quality sport continue to be in demand and prices are being pushed up on limited supply. Best known for red deer stalking, grouse shooting and salmon fishing, Scotland continues to attract interest from around the world, with properties between £1 – 3 million readily finding buyers, particularly where the house is not too big. Supply has been particularly short in the ‘wilderness estate’ market which, unique to Scotland, always attracts strong interest from around the world from conservationists and privacy seekers. The most sought after property is the mixed, income-producing estate, which requires little investment beyond the purchase price. The best example to come to the market is Killean Estate on the Kintyre Peninsular, Argyll, which includes farming, forestry, holiday lets, shooting, fishing, a village shop and huge ‘renewable energy’ resources. At offers over £7.5 million this is right at the top end of the price scale in Scotland. There is some concern that uncertainty has been created by the forthcoming referendum on independence and the Scottish Government’s focus on land reform may have deterred some investors in committing to Scotland, until more is known about how ‘foreign’ property owners will be treated. There is however no real lack of interest and even if Scotland becomes an independent country, it can ill afford to discourage inward investment, particularly in the countryside. The prospects for 2013 remain good, with pricing being key particularly where a big house is involved. Sporting and wilderness estates are expected to perform well with prices remaining strong and with some growth where there is an element of good farmland.
2012
2011
2010
£30,000 - £40,000
£30,000 - £40,000
£30,000 - £40,000
£3,000 - £3,500
£3,000 - £3,500
£3,000 - £3,500
£5,000 - £6,000
£5,000 - £6,000
Stalking Stags (per head) Roe Bucks
Shooting Grouse (per brace)
£5,000 - £6,000 Fishing
2 3
Salmon (per fish caught)
£4,000 - £8,000
£4,000 - £8,000
£4,000 - £8,000
Sea Trout
£1,500 - £2,000
£1,500 - £2,000
£1,500 - £2,000
Based on the IPD UK Forestry Index, which is the leading, independent measure of forestry investment performance. The Coniferous Standing Sales Price Index for Great Britain, which is based on sales by the Forestry Commission.
Prospects for 2013 Whilst demand continues to outstrip supply, prices are likely to continue to rise but, we believe, more slowly. There is also no doubt that lending into agriculture has also been tighter in 2012 and some deals have had to be renegotiated after funding has been withdrawn or offers altered at the last minute. We see this trend continuing, particularly after such a difficult harvest. Our historic analysis shows that the amount of land for sale falls before a Common Agricultural Policy reform as farmers wait to see the detail. We expect this to happen in Scotland, particularly as the reform looks more benign than the original proposals. We also expect institutional investors, who have been active in the England this year, to cast their eye to the best and most accessible of Scottish units as English opportunities are in such short supply. Larger units will be of most interest here and an element of let land an advantage.
Contacts Our regional farm agents would be pleased to give you more information about the land market in your region or county. Please do not hesitate to contact them: The Farm Agency team in Scotland John Coleman Edinburgh t 0131 344 0881 e john.coleman@ smithsgore.co.uk
Kay Paton Dumfries t 01387 274394 e kay.paton@ smithsgore.co.uk
Jamie Watson Fochabers t 01343 823005 e jamie.watson@ smithsgore.co.uk
National Head of Farm Agency
Giles Wordsworth
London
0207 4099490
Northern England – Head of Farm Agency
Sam Tydeman
York
01904 756303
North East North West Yorkshire and Humber West Midlands East Midlands
Iain Welsh Simon Waller Sam Tydeman Ed de Lisle Luke Humphries Andrew Teanby
Darlington Clitheroe York Lichfield Peterborough Lincoln
01325 370500 01200 411052 01904 756303 01543 266407 01733 559322 01522 539555
Southern England – National Head of Farm Agency
Giles Wordsworth
Oxford
01865 733302
East of England South East and South Central South West
Bennett Swayne Michael Wooldridge Harry St John Simon Derby Toby Perry
Newmarket Maidstone Oxford Taunton Exeter
01638 676748 01732 879052 01865 733304 01823 445036 01392 294891
Wales
Charles Orr-Ewing
Sennybridge
01874 636868
If you have any questions about this review, please contact Dr Jason Beedell, Head of Research, on 01733 866562 or jason.beedell@smithsgore.co.uk