Next Generation Newsletter
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Buoyant land values have continued in Scotland throughout 2022 due to continued low supply. Compared to 2021, the farmland market in Scotland was 16% smaller in 2022, with 524 sales realizing a total value of £268 million. With interest rates remaining high at 5.25% and at levels not seen since 2008, this may encourage more land to come onto the market, because some farms will not be able to service debts due to rising input costs and margins continually being squeezed. However, land values are forecast to continue increasing over the next five years. Traditionally, investment in land produced good returns as these were above inflation levels, but with inflation rising since 2021 values of some land classes haven’t increased at the same rate. Over the last 12 months, all land classes have increased in value, but the greatest increases have been in upland pasture because of continued demand from forestry and natural capital investors. Several factors over and above demand influence land values including location, soil type, production capacity, and opportunities for diversification or renewables.
|2022 (Average £ per acre)
|% change over last 12 months
|Improved permanent pasture
Source Knight Frank
Limited supply coupled with high interest rates can mean that new entrants are outcompeted in the market. However, new entrants with their ingenuity, knowledge of technology, and keenness to diversity may be able to identify opportunities to utilize farmland in ways other generations may not have thought possible.
Routes To Buying Land
Buying land as a new entrant is possible, testament to that is our case studies of those who have achieved that dream. You can view some of these stories here: https://www.fas.scot/rural-business/new-entrants/inspirational-stories/inspirational-stories-3/ To be successful in the purchase of land as a new entrant you need to clear two main hurdles:
- Finding land
Farmland for sale is commonly advertised through several selling agents, but some properties are sold privately. Therefore it’s recommended to register your interest with land agents in the locality you wish to buy in. They will have knowledge of any current or future opportunities.
- Sourcing finance
Finance can be sourced from traditional banks or brokers. Generally, they will lend 60 -70% of the total funds you require, which is also termed the loan to value (LTV) ratio and some form of deposit or security is required. A good business plan is crucial to provide lenders with an insight into how your business will be structured, what you are looking to fund, the level of funding you required, and how you will service the debt. This includes planning for any hiccups you may experience such as price drops for outputs or increases to input costs. If the last few years have taught us anything it is to expect the unexpected, and things don’t always go to plan! Read our business planning factsheet for more information https://www.fas.scot/downloads/business-planning-fact-sheet/
Financial support to help you compile a business plan is available through FAS via ILMPs and specialist plans. Further information is available at https://www.fas.scot/integrated-land-management-plans-ilmps/ and https://www.fas.scot/specialist-advice/
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