Carbon-offsetting has 'transformed' the Scottish land market

The growing role of non-farming investors has resulted in values being influenced by corporate considerations (Image: Getty Images/iStockphoto)
Insider | 12 Apr 2022

Carbon-offsetting has 'transformed' the Scottish land market
Scotland’s land market has been transformed as corporate buyers swoop in for farmland in an effort to offset carbon emissions.
Findings from the Scottish Land Commission show the changes to rural land markets and values, amid strong timber prices and rising demand in non-farming leisure estates.
Corporate entities are increasingly interested in plantable land and forestry holdings, according to the Rural Land Market Insights report.
And non-farming investors are playing an increasing role, with heightened demand for smaller farms as lifestyle holdings.
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, according to the report.
Farmland values rose in Scotland by 31.2% in 2021, against 6.2% across the UK.
Almost half of all estates purchased in Scotland last year were sold to corporate bodies, investment funds or charitable trusts, due to the carbon offsetting potential.
Carbon offsetting allows companies to rectify their gas emissions by investing in renewable energy projects or planting trees.
The report was compiled by Scotland’s Rural College (SRUC), in partnership with land agents Savills and Strutt and Parker, with support from the Royal Institution of Chartered Surveyors (RICS).
It draws on published market information and interviews with industry experts to provide a current picture of buyer and seller motivations, to better understand the land market and what is driving it.
Hamish Trench, chief executive of the commission, said: “Emerging carbon and natural capital value is an increasing influence, but other drivers, particularly high timber prices and forestry values remain significant.
“The report 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.”
It also showed that off-market sales make up a significant proportion of land activity as a third of farmland, forestry and plantable land were sold in this way; rising to 60% in estates sales.
The findings also recognise there is an element of speculation in the land market as investors look for a safe haven amid a turbulent global economy and gamble on future carbon values rising.
Strong growth is expected to continue due to continued low supply and high demand, high levels of private wealth and corporate interests seeking land, long-term policy on climate change and increasing pressure on global timber markets and food supply chains.
Nearly two-thirds of last year’s sales were carried out privately, without the land going on the open market, with a third of the total going to overseas buyers.
These “off market” sales meant land was changing hands secretly without allowing local people to put in bids, the commission warned.
Trench said these trends could make it “significantly harder” for local communities, cooperatives and social enterprises to buy land, stifling efforts to promote rural economic diversity.
That greatly increased the case for new public interest tests to be introduced on large land sales, and for rules to prevent private land sales excluding local communities.
Trench stated: “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 land ownership, 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,” he added, concluding: “To inform our advice to Scottish Government we will be holding a series of events and discussions with stakeholders to discuss the findings of this report and its implications for both policy and practice.”
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