Dont asset strip, Scots warned as prices widen
Dont asset strip, Scots warned as prices widen
By Catherine Paice
PRICE variations are widening in Scotland, but farmers are warned against "asset stripping" their property.
Based on an average £2100-£2200/acre for productive class 3 land, prices can vary by as much as £800-£900/acre for the same type of soil, says Charles Dudgeon of FPDSavills in Edinburgh.
Prices for some farms are down 20%-25% on 1997, values for others have changed little, and residential farms are flying on the back of a 30% increase in house prices in and around Edinburgh. Mr Dudgeon says the best farmhouses can reach £500,000, adding £1000/acre to a 500 acre farm.
Cottages worth £20,000 in the late 1980s boom are now making up to £70,000. But Mr Dudgeon warns against selling a house or cottages away from the farm. "That is a sure way of devaluing the farm," he says. "If an owner has value tied up in property, and it needs to be released, he would do better to sell as a whole and buy another farm.
"The ring-fenced farm which controls everything within its boundaries is the one that will get a good price."
The market is caught between those who are getting out and those who are staying put and getting bigger, says Mr Dudgeon. "Everyone is raving about residential buyers snapping up everything, but it is not always the case. We had eight bids for one farm, with just under £6m of farming money on the table. The industry appears to be starved of cash, but there is cash in the system."
Of 16 farms under offer or going through, 10 are being bought by farmers, he reports. "Some have other businesses, but they certainly intend to farm themselves."
As at October, advertised acres were some 22%, and number of holdings 27%, down on 1998. It represents a 60% drop since the beginning of the decade – and there is no sign of any rise in volume.
"If we are going to see an increase, I would expect to see it in the next six to 12 months," says Mr Dudgeon. "Where banks are concerned, the last good year (1996) will have dropped out off the end of the budget sheet, but if there is any sign of a recovery sales will be held back again."
Apart from those with a good house, properties with 200-400 acres of commercial land were finding the most competition. "They are bolt-ons, and more affordable than a 500-600 acre unit."
Prime spots for buyers are the east coast, central Scotland and the borders. "I believe something like 60% of sales have been in the south-west and north-east," says Mr Dudgeon. "That leaves a dearth of property in sought-after areas."
Half Octobers acreage is taken up with two properties, one of which was 2860 acre Culgower in Sutherland, through Aberdeen & Northern.
"There has been a real shortage across the board," says Michael Jones at Bell-Ingram, Perth. "Come next spring I think that will change. I said that a year ago, but I think it will have to happen. I suspect the increase in volume will come from unviable units which wont appeal to non-farmer buyers."
Good quality arable farms will always be in demand, he says. Small hikes in interest rates to the expected 6% base rate by this time next year should not erode the market.
The firms next newsletter will quote values for most arable land in the £2100-£2500/acre bracket, down from £2500-£3000/acre two years ago. Poorer arable land is less, and the best is averaging £2500-£2800/acre.
Permanent pasture is put between £350 and £700/acre, with ploughable land up to 1200-£1500/acre. "There is a huge range of prices on mixed quality farms," says Mr Jones. *