Hill farms and bare land with the potential for planting trees have achieved unprecedented prices due to competitive bidding from commercial forestry investors.
This rise in demand was the biggest change in the farmland sales market last year, according to Strutt & Parker’s Scottish Farmland Market Review of 2018.
In some cases, forestry investors paid up to £2,000/acre, often several times the actual agricultural value, pricing farming buyers out of the market.
Prices are continuing to rise because of the ongoing demand for UK forests combined with the market being constrained by finite supply.
Softwood timber prices rose by nearly 30% in 2017 and by just under 50% in 2018, Savills’ UK Forestry Spotlight report states. Hardwood values increased at a slower pace, by about 25-30% over the two years.
During 2018 the UK investment forestry market traded £118m of property.
Strutt & Parker’s research found that more land came to the market in Scotland than at any time in the past 10 years, with 120 farms marketed in 2018, up from 81 in 2017.
A total of 45,200 acres hit the market, a 44% increase from 31,300 acres in 2017 and substantially above the five-year average of 34,800 acres.
Scotland is the most forested country in the UK, with 18.5% of its land area.
Robert McCulloch, head of estate and farm sales for Strutt & Parker in Scotland, said: “Buyers varied depending on farm type but were predominantly farmers, rollover buyers and forestry investors.
“From our experience last year, about four out of five farms sold around or above their asking price.”
Why is forestry so popular?
Savills’ report outlines the reasons behind the current popularity of forestry assets as:
- Strong and rising demand for timber
- Long rotation lengths
- Diversification into tangible assets
- Increasing recognition of the environmental benefits of woodlands
- Potential for new opportunities for gaining income or value.
Construction demand for timber is underpinned by housebuilding targets in the UK, and biomass currently offers strong demand for small-diameter material, says Savills.
Meanwhile, according to the Committee on Climate Change, for the UK to meet its greenhouse gas capture targets up to 3.7 million acres of new woodland is needed by 2050, an increase of nearly 50% on the existing woodland area.
In numbers: Forestry land
Gross acres traded in 2018
Average price/net productive acre
UK total area covered by forests and woodland
UK tree cover needed to reach 2050 targets
Acres of tree planting required a year to 2050.
The UK government’s proposed Environmental Land Management scheme for England, which will pay farmers for environmental services and benefits, could open up funding for managing natural resources, especially to mitigate climate change by sequestering and storing carbon.
In a buoyant economy, there is no reason for prices to fall, the report says, and if they do they will recover, as seen in past cycles.
However, Savills advises that trees should be part of long-term planning, because it is not a land use that can easily revert to agriculture, and land values may be affected.
What’s on the market?
Muir Estate, Thornhill, in Stirlingshire, has 188 acres, including 95 acres of planted Christmas trees, 36 acres of commercial conifers, 42 acres of mixed native woodland and a four-acre loch.
The estate comes with a four-bedroom lodge, a timber loading yard and sporting opportunities.
The vendor will retain ownership of the commercial Christmas tree crops for a proposed 10-year leaseback period. Alternatively, the crop is available for sale.
Taking into account the Christmas tree retention, Strutt & Parker and John Clegg & Co are selling the estate as a whole for offers above £1.275m or in two lots.
Savills has launched 2,500-acre Eldrick Forest Estate, Barrhill, South Ayrshire, which comes with about 40 acres of grazing land.
The woodland includes four- to 38-year-old Sitka spruce, mixed with other conifers, broadleaves and designated open ground.
The unit also has two sporting leases and is for sale as a whole for offers above £9.5m.
Arable farm Ethiebeaton, Broughty Ferry, in Angus has 465 acres, which includes 27 acres of permanent pasture.
The holding comes with a four-bedroom farmhouse, buildings, potato storage, grain storage, three 11kW wind turbines, a 198kW biomass system, and the opportunity for further land on a contract farming basis.
With a guide price of offers above £3.9m, Ethiebeaton is for sale with Savills as a whole or in two lots.