Chris Addison-Scott of CKD Galbraith
CKD Galbraith, specialists in rural property surveying has outlined their predictions for farmland values and farm rents for 2010 at their annual Spring briefing in Edinburgh. Chris Addison Scott, partner at CKD Galbraith and head of the rural team said: “As with the rent reviews undertaken over the last two years, we consider that rents will continue to show significant increases where reviews have not been carried for many years. Rent reviews which have been undertaken on a more regular basis will show much smaller, if any, increase. Contrary to some negativity concerning the rent review process, the vast majority of rents are reviewed amicably.”
Over 100 farm rent reviews have been carried out by the firm since 2008 with instructions on a further 30 this year being mainly livestock rearing although a significant proportion carry on dairying.
Estimated rental levels achievable in 2010 (assume farms with dwelling house and adequate landlords fixed equipment) in the region of:
• Hill farms: £9 - £11 per ewe
£55 - £66 per cow
• Arable/Pasture: £22 - £50 per acre in the north and west of Scotland
£60 - £72 per acre in the east and central Scotland
A growing trend in the let sector is the continuing process of tenants retiring from agriculture through agreement with their landlords. Compensation is often in the region of 25% of the vacant possession value of the land and under the current SFP rules that payment can either continue to be claimed on naked acres elsewhere or sold for a further capital sum by the farmer. After 2013 that option may not be available. The firm is currently working on several such proposals and expect to see the trend continuing.
Simon Brown, partner at CKD Galbraith said: “The trend in 2009 was for the neighbouring farmer being the major bidders for any farmland coming up for sale. As we go forward into 2010 I think we will continue to see interest from neighbours but also from farmers looking to relocate as the money supply becomes more available for the agricultural industry.
“In addition I also predict a strong involvement from investors who see farmland as a safe place to put money during difficult times. There have been some quite staggering returns on capital which have been highlighted recently and these returns have encouraged investors to move money into the farmland market. However, the growth in the past five years came from a very low base and will not be repeated in the next five years.
“Farmers, their agents, and advisors have now become used to the fact that arable land trades at or above £6,000 an acre and that permanent grassland is valued up to £2,500 an acre in some regions, whilst the strong demand for upland grazing for forestry purposes has put a base at that end of the market. As we go forward into 2010 I am confident that we will see a slight rise in the value of agricultural land.”
2010 is looking positive although greater certainty in future commodity prices would be a welcomed boost. Overall, this year will be a year for consolidation in farm rents, with both landlords and tenants being reluctant to have rental disputes referred to the Scottish Land Court.