Scotland's rural land market is changing, with strong timber prices and high demand for non-farming leisure estates causing rising values, according to a major report published today by the Scottish Land Commission.

The Rural Land Market Insights Report shows the market to be characterised by exceptionally high demand but continued low supply, resulting in rising values.

It finds that non-farming investors are playing an increasing role throughout the land market, and there is heightened demand for smaller farms as lifestyle holdings and from corporate entities and investors interested in plantable land and forestry holdings.

Compiled by Scotland’s Rural College in partnership with land agents Savills and Strutt & Parker, with support from the Royal Institution of Chartered Surveyors, the report says the growing role of non-farming investors has resulted in land values being increasingly influenced by long-term investment potential and corporate environmental, social and governance (ESG) considerations. Farmland values rose by 31.2% in Scotland in 2021, against 6.2% across the UK; and In the estates market there was an estimated 87% increase on prices paid in 2020, with two estates selling for more than £20m and five for £10-£20m.

There has also been a marked shift in buyer types, with nearly half of all estate sales in Scotland in 2021 being to corporate bodies, investment funds or charitable trusts – motivated by the potential for carbon offsetting and developing large-scale environmental improvement.

Market activity is being driven differently across prime agricultural, plantable forestry, and peatland areas; though across Scotland, with some regional variation, commercial forestry appears to be the biggest driver of increasing land values at the moment. Natural capital, and specifically carbon sequestration, is influencing land values in upland regions and areas with large extents of peatland and low quality non-plantable agricultural land. 

Off-market sales make up a growing proportion of land market activity – up to one-third of farmland, forestry and plantable land sales, rising to almost two-thirds of estate sales, almost double the proportion in 2020. This trend may exclude certain buyers and constrain access to land for individuals, communities and businesses, raising questions about transparency of the land market and potentially reinforcing Scotland’s existing pattern of concentrated landownership.

With investors looking for a safe haven in a turbulent global economy, and gambling on future carbon values rising, strong growth in land values is expected to continue.

The report identifies an increasing trend of new buyers seeking substantial land use change. Such change, it states, may be aligned with some public policy objectives, for example woodland expansion, but may also bring unintended consequences. A public interest test at the point of significant transactions, as previously proposed by the Commission, could introduce greater accountability and transparency.

In addition, engagement and joined-up land use planning are important in addressing the unease felt among some communities about the pace and scale of land use change, which could undermine public support for the expected changes involved in a transition to net zero.

Hamish Trench, chief executive of the Scottish Land Commission, commented: "This report shows what is happening in the rural land market and helps us understand why. Emerging carbon and natural capital value is an increasing influence, but other drivers, particularly high timber prices and forestry values remain significant.

"It emphasises that while the amount of land coming to the market has remained largely the same over recent years, demand from different types of buyer has increased significantly, raising prices."

He added: "The way the land market functions is important to Scotland’s ambitions such as net zero, nature restoration, repopulation, and community empowerment. Being able to participate in the market shapes not just who owns Scotland’s land, but who is able to make decisions and who benefits from land and its economic, social and environmental value.

"The report highlights a complex set of influences at work in the land market with implications for the diversity and accountability of landownership, community participation in the market, land use decision making and market transparency. There is no simple answer: shaping the market in the public interest will require a careful and joined up approach in policy as well as responsible practice on the ground."

To inform its advice to the Scottish Government, the Commission will hold a series of events and discussions with stakeholders to discuss the findings of the report and its implications for both policy and practice.

A second report will provide baseline data and a proposed approach to improve future market reporting.

Read the full report, or a summary version.