Why land sales have fallen substantially in Scotland's rural areas

Land sales in rural Scotland have been described as 'sluggish' over the last year | Katharine Hay

Land sales have been described as “sluggish” over the last year due shifts in policy, carbon credit behaviour and the economy, land agents have said.

The findings were revealed in a report published by the Scottish Land Commission (SLC) this week.

One factor has been companies looking to generate carbon credits were increasingly looking to form partnerships with landowners rather than purchasing land themselves.

This year’s SLC report said “the forestry sector saw a significant slowdown compared to previous years.”

James MacKessack-Leitch, from SLC | SLC

James MacKessack-Leitch, from SLC, said this has been due to “increasing uncertainties on the demand side,” adding: “We know from our wider work in this area that many investors are now looking to partner with existing landowners and communities to deliver projects.”

This is a change from the SLC report last year which found commercial forestry interests, which were primarily in upland farms and agricultural land, were the biggest influence in driving land values higher in an already squeezed market in 2022.

It found their purchases added to an “overheating” land market in Scotland that drove prices to record levels.

The sluggish flow over 2023, however, has also been caused by delays in the approval process, the report found.

The SLC report said obtaining planting permissions for forestry and planning permissions for buildings and infrastructure is taking longer than usual.

This has led forestry buyers to prefer purchasing already established woodland over bare land, and has reduced interest from natural capital investors, which the report said has “slowed considerably compared to previous years.”

According to a 2023/2024 report by estate agents Strutt & Parker, farmers continue to be the main buyers of farmland in Scotland. But a lack of clarity on future farming support from the Scottish Government has been problematic for farmland sales, the agents said.

Scotland is behind when it comes to confirming the financial detail on future farming subsidies since Brexit compared to other countries in the UK.

The SLC report also found persistently high UK interest rates contributed to slow land sales over the last year. This also impacted the wider society, not just rural areas.

The increased cost of servicing debt resulted in a number of buyers unable to complete purchases as planned in 2023.

The land agents interviewed for the SLC report said elevated input costs, particularly energy, and lower commodity prices, which have affected timber and agricultural produce, have also interrupted land sales.

Other changes in public policy have also contributed to slower sales, including the newly introduced Land Reform Bill, which has measures that will apply to large landholdings of over 1,000 hectares, prohibiting sales in certain cases until ministers can consider what impact this will have on the surrounding community. This could lead to some landholdings being lotted into smaller parts, and therefore impact decisions on land sales.

The SLC has previously published two rural land market reports.

Comparing them, Mr MacKessack-Leitch said: “Reviewing the past three years of reports, it is evident that the first report (focusing on the 2021 market) captured a period of intense competition driven by natural capital interests and commercial forestry. 

“The second report highlighted a more slowly rising market, but this most recent report shows a clear decline in natural capital buyers and commercial foresters due to increasing uncertainties on the demand side.

“What this report does is highlight how exposed Scotland’s rural land market is to fluctuations in the economy both nationally and globally as well as how responsive it can be to fiscal and public policy.” 

Alongside reported sales, the SLC’s reports have consistently examined off-market activity levels.

The 2022 report found off-market, or “secret” sales, made up a significant proportion of all transactions. While there had been a fall in these private sales in the estates market, the report said there had been a noticeable increase in such sales involving upland farms going to forestry.

In 2023, however, the report found off-market sales of estates decreased compared to previous years, while off-market sales of farmland saw a slight increase, continuing the pattern observed in 2022. 

The latest report uncovered a new trend of semi-off-market sales, where agents privately advertise land to a select group of buyers and invite blind bids. This type of sale was particularly prevalent in sales of estates.

Mr MacKessack-Leitch said the findings of this year’s report “underline the need for ongoing reform, including the measures proposed in the Land Reform Bill.”

He said there is a need for “more joined up policy that regulates and intervenes to shape the land market in a way that protects public interest.”

Michael Russell, former president of the SNP, was appointment as chairman of the Scottish Land Commission earlier this year | Jeff J Mitchell

The appointment of SNP veteran Michael Russell earlier this year as chairman of the SLC, Scotland’s main land policy advisory organisation, fuelled fears of an “erosion” in trust in the commission from the rural sector.

Mr Russell, who stepped down from his role as the president of the SNP in December 2023 was, days later, confirmed to be the new chairman of the SLC.

He is known for having ardent views on land reform from his previous career in a political seat.

Given the SLC’s role in advising the Scottish Government on the ongoing programme of land reform, it left some of those in the rural community tongue-tied.

Critics said having a former SNP president at the helm would result in “a politician advising politicians.”

At the time of his appointment, Scottish Land & Estates chief executive Sarah-Jane Laing said questions were raised about the process behind Mr Russell’s appointment, and that some of his “strident views about supercharging land reform” were “likely to raise concern with those who manage and invest in various forms of land-based businesses”.