A range of factors from volatile commodity markets and continuing low interest rates, to political uncertainty, could be behind a rise in farms changing hands in Scotland over the next 12 months.

John O’Meara from the Agricultural Mortgage Corporation (AMC) says increased numbers of enquiries about loans for farm or tenancy purchase seem to have been triggered by a ‘perfect storm’ of factors.
 
“Early indications suggest we could be looking at a significant increase in transactions of tenanted land over the next 12 months, especially as movement of farms over the past two years has been fairly quiet,” he says.

“In some cases, it’s the landlord buying the tenancy; in others, it’s the tenant hoping to buy the freehold. Either way, the current combination of market forces, and what has been an almost unprecedented period of low interest rates, seem to be encouraging an environment for change in how farms are owned and managed.”

Mr O’Meara added that in the case of tenants wishing to buy their landlord’s interest, discounted values associated with sitting tenant purchases could allow them to buy the farm at a significant discount to vacant possession value.

“Tenant farmers can sometimes find it difficult to borrow money without security. Buying the farm creates an asset against which they can borrow and in turn helps them invest in the future of their business.”
 
Sian Robinson of Savills, who covers the south west of Scotland, believes that the future for farming is bright – but she said that unseasonal  weather, prolonged periods of reduced commodity prices and decreasing subsidies are prompting tenants and landlords to reconsider their options.

“People do have reservations about the mismatch that has developed between farm rental prices and the capital value of the land,” she says. “But they’re also worried about CAP reform and the raft of political changes we are in the midst of at the moment.

“On one hand we’re seeing a situation where tenants might be looking to get out of farming; this offers landlords the chance to buy the tenancy and take up the land themselves, or re-let it on a modern tenancy without right-to-buy concerns.
 
“Conversely, landlords may wish to sell the farm voluntarily to the tenant, providing the tenant with an asset to borrow against and security for the future.”

More information about borrowing to buy farms and tenancies will be available from John O’Meara and his AMC colleagues Dugald Hamilton and Nigel Parmenter at the Royal Highland Show on 18-21 June. The AMC stand will be located on Avenue P.