Aug 27 2013
REALISM NEEDED IN LAND AND RENT MARKETS
REALISM NEEDED IN LAND AND RENT MARKETS
The Scottish Tenant Farmers Association is concerned that the recent publicity claiming record highs in farmland prices will heighten landlords’ expectations in the next round of rent reviews in November.
Last week the surveyors professional body RICS, announced that a survey of members opinions was indicating that farmland prices had trebled in the last decade and were expected to rise even further over the next few years. Furthermore, the RICS spokesperson said “The growth in farmland prices in recent times has been nothing short of staggering. In less than ten years we’ve seen the cost of an acre of farmland grow to such an extent that investors – not just farmers – are entering the market. If the relatively tight supply and high demand continues, we could experience the cost per acre going through the ten thousand pound barrier in the next two to three years.”
STFA chairman Christopher Nicholson said: “This would seem to be yet another attempt to talk up the land market and we can expect to see this hype reflected in the rental sector in a couple of month’s time as the rent term date approaches and land agents try and use the open market to drive up rents.
“The capital cost of land rarely reflects its agricultural productivity and this is as true in the rental market as scarcity causes rents to overtake profitability. It is high time that commonsense was brought to bear and sitting tenant rents become based on the real worth of the land, that is, what the farm can produce rather than what it could fetch in an over-heated market stoked by profit driven land agents.
“The failure of last year’s report by the Rent Review Working group to recognise the weakness of the rent review formula and recommend change was a major disappointment to the tenanted sector. The Group’s lacklustre report is widely regarded as a lost opportunity to stabilise these unsustainable farm rents.
STFA will be using the forthcoming review of agricultural holdings to press for radical change to the way in which farm rents are set to ensure tenants’ businesses are not crippled by unreasonable rent demands. The issue of farm rents is a major problem and one of the main causal factors in calls for serious land reform in Scotland. The tenanted sector will continue to stagnate unless these real issues are addressed as a matter if urgency.