THE value of farmland in Scotland is holding up in the face of turbulent agricultural commodity prices and uncertainty over future levels of support payments post-Brexit.
According to Charles Dudgeon of land agent Savills: "Scotland and the UK have both enjoyed uninterrupted land price growth since 2001 - one of the longest periods of growth in the last 120 years. There have been shorter periods of faster growth, such as in the 1970s, but not offering the same stability."
While final figures for the 2016 selling season won't be available until the end of November, it has become apparent that a shortage of supply is supporting land values. In 2015 there were 43,000 acres offered for sale in Scotland, but to date in 2016 there have only been 37,000 acres.
To put that acreage in context, prices for land were low when there were over 140,000 acres being traded per annum in Scotland in 1987, 1988 and 1989. Land values also eased in 1999 and 2000 when the supply in Scotland crept back over the 100,000 acres per annum.
That followed a period between 1992 and 1997 when there were only around 60,000 acres available annually and land prices doubled.
Paradoxically, prices fell by 35 per cent in 2001 when supply dried up to around 30,000 acres as a result of Foot-and-Mouth, the introduction of the Single Farm Payment, advantageous movement in sterling against the euro, and better commodity prices. By 2007 land values had doubled again, and have kept on rising since.
Soaring land prices are the hidden untaxed profit in farming. 1952-1958 saw prices for farmland with vacant possession stable at around £80 per acre.
During the 1960s values rose steadily to just over £200 per acre and accelerated to over £1300 per acre by 1980. This rapid growth was dampened a little in 1973 and 1974 when inflation topped 24 per cent and interest rates reached 12 per cent.
1972 had seen a remarkable boom in land prices - it was a historic year, which exploded upon an unsuspecting farming and business community.
The reasons were complex and manifold - a sagging economy, falling share prices, the optimism of the Common Market, and a general fever which always grips uncontrollable booms.
There are many reasons for owning land other than just returns from farming - not least the fact that farmland and forestry are exempt from inheritance tax.
Current returns from equities and other investment vehicles are abysmal. Indeed, that may be one of the reasons farmers have been reluctant to sell their farms.
What do you do with the money? Farmland is still seen as a stable strategic investment capable of providing a small but consistent return, and is therefore a good medium to long-term investment.
There is a lot to be said for owning land where you can live, have a pleasant day's shooting with friends on, have a walk or ride a horse over and enjoy the scenery. People buy land for lifestyle reasons as well as for untaxed capital growth.
According to Mr Dudgeon, farms are taking longer to sell mainly because agents need to ensure that the bidders have finance in place and the arrangements take longer to agree.
While the more difficult farms with poorer quality land, house and farm buildings need to be marketed with a more attractive guide price rather than some of the outrageous ones of recent years, values for good farms are holding up well.
The current buyers are often families expanding their acreage in anticipation of lower subsidies and to ensure the next generation have a viable unit, neighbours adding to their holdings and English purchasers seeking a larger acreage for the same value as their farm is worth.
One of the big attractions in Scotland for outside buyers is value for money compared to the rest of the UK.
Land prices in Scotland are typically between 10 and 15 per cent below English levels for comparable land, but in the past three years that gap has widened to as high as 60 per cent, and in some cases 100 per cent. While those high English prices are now easing, they remain an influence on the Scottish market.
The downside to the booming property market is that new entrants can't afford to buy. Rents are also inflated by scarcity as a result of farms being withheld from the letting market when they become vacant.
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