Rural land market in Scotland cools as economic uncertainties loom – Scottish Business News

The Scottish Land Commission’s 2024 Rural Land Market Insights Report, based on interviews with 17 land agents, offers a comprehensive analysis of Scotland’s rural land market in 2023. Key findings include:

The land market experienced a notable slowdown, described as “sluggish” with softening sentiments and longer transaction times.

High interest rates and the cost-of-living crisis were primary factors affecting market dynamics, impacting input prices and deterring potential buyers.

Supply remained restricted while demand slightly weakened, creating a cautious market environment. Uncertainty surrounding agricultural subsidies and the carbon market influenced both supply and demand.

Despite the slower market, land values remained largely consistent or slightly increased, except for marginal hill land.

Sector-Specific Insights

Farmland

Mixed dynamics were observed, with farmers seeking economies of scale driving demand for land expansion.

Rollover funds, particularly from those who sold to forestry or natural capital buyers in previous years, played a significant role in market activity.

Forestry

The forestry sector saw a significant slowdown, with fewer properties offered for sale and decreased confidence due to unclear policy direction and lengthy approval processes.

Two distinct buyer groups emerged: commercial forestry investors and natural capital investors.

Natural Capital

Purchasing land for natural capital purposes slowed considerably. Most carbon scheme applications came from existing landowners and farmers rather than new buyers.

Companies increasingly favoured partnerships with landowners instead of direct land purchases.

Estates

Estates attracted a range of buyers with varied motivations, including traditional buyers and institutional investors driven by natural capital interests.

New government policies, particularly around short-term lets, negatively affected the market for estates with large residential portfolios.

James MacKessack-Leitch, policy and practice lead at the Scottish Land Commission, said: “Despite challenges with the data, the report reveals clear trends, such as low market activity in large-scale transactions and a cooling of the forestry land market.

“By improving the quality and transparency of market data, we can gain the insights needed to identify opportunities to create a vibrant and transparent rural land market which is key to creating more opportunities for communities, businesses, and individuals to own and benefit from Scotland’s land.”

The report emphasises the need for improved data quality and transparency to support land reform objectives and create more opportunities for communities, businesses, and individuals to benefit from Scotland’s land.