Land values rise as investors offset emissions
Corporate investors acquiring farmland to offset carbon emissions have influenced land values across rural Scotland, according to a new report.
Almost half of all estates bought in Scotland last year were sold to corporate groups, investment funds or charitable trusts, coinciding with a 31.2% rise in farmland values compared with 6.2% across the UK.
The Scottish Land Commission’s report notes the growing role of investors in land values as buyers invest in land for forestry holdings, as well as smaller farms acquired as lifestyle holdings, in many cases to offset carbon emissions.
The report was compiled by Scotland’s Rural College in partnership with the land agents Savills and Strutt & Parker, with support from the Royal Institution of Chartered Surveyors.
Hamish Trench, chief executive of the Scottish Land Commission, said: “Emerging carbon and natural capital value is an increasing influence but other drivers, particularly high timber prices and forestry values, remain significant.
“While the amount of land coming to the market has remained largely the same over recent years, demand from different types of buyer has increased significantly, raising prices.”
The report also recognises a degree speculation in the land market as investors look for safer asset classes amid uncertainty in global markets.
Responding to the report, Sarah-Jane Laing, chief executive of Scottish Land & Estates, said: “The report acknowledges that the land market in Scotland is complex and there are multiple reasons for purchasing and using land. The reality is that a diversity of ownership exists and includes public, private and community interests.
“What is of paramount importance is that the best use is made of land for social, environmental and economic benefit. That includes, forestry, farming, renewable energy, housing, peatland restoration, tourism and leisure and these activities are happening all over Scotland.
“It is unsurprising that potential buyers are responding to clear government signals to plant more trees and sequester more carbon as part of a global effort to tackle climate change.
“Long-term investment in forestry is attractive to landowners and farmers as there is less volatility compared with some markets for farming produce.
“However, as stated in the report, carbon is only the motivation for some buyers and it is clear that from this small sample of land sales that about half of buyers are acquiring estates and land for other reasons.
“The report itself says that the land market is shaped by high demand and low supply and it is unsurprising to see significant increases in transactions last year due to the pent up demand created by the pandemic in 2020. It is more useful to look at longer term trends in both the farm and estate markets.
“As regards off-markets sales of farms and estates it is worth noting that this has been a feature of the market for some time and communities with an interest in acquiring land can register that interest.”
“Our members supported this research and welcome the production of data on the land market. The more reliable evidence we have the better. It is critical that any new policy or regulations are based on sound evidence rather than perception.”