The latest Knight Frank Scottish Farmland Index shows that average farmland values appreciated by 7% last year.
Agricultural land in Scotland has now almost tripled in value over the past decade, outperforming many other asset classes, such as the FTSE 100 equities index and UK residential property, in terms of capital value growth.
The rise in values has alerted many investors, according to James Denne, who heads up Knight Frank’s Scottish Farm Sales’ team.
He said: “I have just sold a large block of good arable land to an investment fund. The price was slightly lower than they would probably have had to pay south of the border, but the prospects for capital growth are just as good.”
Investors are also attracted to farmland because it is more tangible and less volatile than some other investments, particularly during times of economic uncertainty.
Andrew Shirley, head of Rural Research, commented: “If a company you have invested in fails, the value of your shares could be worthless. Farmland will always retain its underlying worth and will continue to provide a rental income. It is also unlikely to experience the short-term peaks and troughs that affect equity markets.”
Scottish farmland also offers other opportunities for investors, not to mention lifestyle purchasers, as well as agricultural income, points out Ran Morgan, Head of Estate Sales.
Morgan said: “We are currently selling a large Highlands estate that boasts some amazing stalking, fishing and shooting, but it also has a huge potential income from hydroelectricity. This has really caught the imagination of potential purchasers who like the idea of owning a fabulous sporting estate that can actually pay for itself.”
Subsidy payments for renewable electricity production are particularly attractive for hydro schemes, which can be less controversial than wind projects, added Morgan.
Looking forward, the Knight Frank Scottish Farmland index predicts further growth in values of 3-4% over the next 12 months. “It doesn’t seem as if there will be any more land on the market in 2013 than last year, so I expect values to maintain their steady upwards trajectory,” says James.
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