Farming: Land prices up on expansion and investment

FARMLAND prices in Scotland rose in the second half of 2009 as land once again became an attractive investment, and landowners' reluctance to sell pushed supply to exceptionally low levels, according to the latest Royal Institute of Chartered Surveyors market survey.

Supply of both residential and non-residential farmland fell at the end of 2009 yet demand for both, particularly non-residential, was up, demonstrating the growing appeal of land as an asset class.

Demand is coming from investors who view farmland as a stable venture. Established farmers are also looking to capitalise on rising livestock prices and greater optimism in the industry by acquiring land for expansion.

The main purchaser type in Scotland is the industrial farmer at 77 per cent followed by the non-farmer on 13 per cent and agricultural business purchasers, accounting for 8 per cent.

Harry Lukas of CKD Galbraith in Galashiels said: "The shortage of land is a major factor in maintaining prices in the Scottish Borders. There is strong interest in planting land on upland properties."

The bare arable land price in Scotland, which is based on the opinions of respondents to the survey, was 11,738 per hectare in the second half of 2009, up from 9,884 in the first half.

However, pasture land prices in Scotland dipped in the second half of the year to 5,560 per hectare, down from 6,178 in the first half.

Sarah Speirs from RICS Scotland said: "When prices were rising two years ago it was mainly being fuelled by hobby farmers, buying up rural retreats and inflating the market.

"These latest results indicate that it is now farmers looking to expand and investors who see it as a viable business or investment class that are fuelling the rise in demand.

"Those with land are loath to dispose of it, and those without, or with a limited supply, are keen to get into the market and capitalise on its rising value.

"However, the lack of mortgage availability for residential farmland is still hampering that part of the market in places."