Regional outlook: Bigger land supply in Southern Scottish market expected in 2016

Westloch Farm, a 2,500-acre livestock enterprise near Peebles, sold to forestry investors and exceeded its asking price of offers over £3m.

In our last of the regional farmland outlooks before Christmas, we ask agents about the market in Southern Scotland. 

Supply of land and farms is expected to increase in southern Scotland and the Borders in early 2016 as a lack of farm profitability bites and land prices remain high.

Buyers have been price-sensitive this year, agents say, because of low commodity prices and lenders scrutinising borrowing against farm incomes.    

See also: Northern Scottish farmland market looks hopeful after subdued year

A large proportion of buyers have come from outside Scotland seeking better value land, with the majority coming from England and a few from overseas.

Lifestyle buyer numbers have decreased, while investors and local buyers have been looking to cherry-pick the best offerings – particularly arable operations and those with forestry potential.

James Butler, Strutt & Parker, Edinburgh

• Values for prime arable land have continued to increase but average prices for other land types have steadied. Buyers have become more selective, resulting in a more price-sensitive market.
• An increase in pressure on profitability in farming combined with high land values is likely to encourage more farmers to cash in during 2016.
• While Scottish land values remain lower than its neighbouring countries, demand from outside Scotland will continue to provide competition for local buyers.
• The principal reasons for purchase are upsizing and funds to rollover.
• About 60% of our purchasers in 2015 have come from outside Scotland due to the price disparity, with the majority from England and several from overseas.
• Supply in 2015 increased slightly against 2014, and improved with an increase in the number of commercial arable farms and large stock farms offered for sale in 2015.
• The market sentiment is that supply will increase in 2016, which is likely to cause some sellers to launch early in the year in order to beat the anticipated competition.
• Well-balanced farms with more than 400 acres of productive land and with a price between £1.5m and £3m generate most interest. There are fewer buyers for equipped farms with less than 250 acres and farms with two or more residential properties, which tend to sell separately.
  

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James Carnegy-Arbuthnott, CKD Galbraith, Edinburgh

• There has not been a large number of farms for sale in the Borders this year and demand remains in excess of the supply for good arable units, well-equipped livestock farms and land with forestry potential. This is despite a background of generally low levels of confidence in the industry brought about by poor commodity prices, the strength of the pound and falling subsidies.
• Bare arable and grazing land has proved harder to sell where there are no acquisitive neighbours. Buyers are mainly farmers, forestry investors and investors seeking inheritance tax shelters.
• We are receiving fewer enquiries and offers for farms and land than we have experienced in recent years. Lifestyle buyers are a rare breed at present.
• The forestry investment market is strong and this demand adds to the competition for upland farms and land which have potential for planting.
• We predict similar market conditions in 2016 – small increases or decreases in confidence are likely to have disproportionate effects on demand.
  

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Luke French, Savills, Edinburgh

• In the Borders, supply has been marginally up on 2014, but in the Lothians it has been slightly back. It has been a pretty slim market with only 15 farms in the two regions advertised over the course of the year.
• We have certainly seen the top of the market but there’s no evidence to show that prices have started to drop.
• With reduced BPS payments and commodity prices where they are we expect there to be an increase of supply in 2016 as farmers come under financial pressure.
• We have not seen significant numbers of investor buyers. Most sales have been to local farmers looking to buy lots from larger units, and some coming from England who have cashed in on the strong prices south of the border.
• Lenders are scrutinising business plans with more intensity in light of depressed commodity prices and that’s leading to buyers taking longer to get their offers on the table, but best-in-class farms are still in high demand.