Land Valuation Formation Influences
This report forms part of our research on land markets and land use change. The project aims to understand whether recent land transactions are leading to (and fueled by) land use change, for example, towards achieving net zero. Relatedly, it aims to explore the influence of financial support mechanisms on land values, particularly the recent interest in carbon schemes.
This report, Influences on Land Valuation Formation, follows on from Rural Land Values and Land Diversification and Rural Land Values, Sales and Investment Trends reports.
What were we trying to find out?
Land prices in Scotland took a dramatic upward turn around 2019-21. This was partly due to the interest in natural capital markets, as the Scottish Government introduced ambitious plans for reaching Net Zero and significant financial incentives to pursue Nature Based Solutions to carbon sequestration.
We were interested to find out whether the means in which land values are determined had changed due to this changing landscape.
What did we do?
We interviewed land agents and valuers operating across Scotland and asked about their approaches to valuing land, particularly land with the potential for Nature Based Solutions for carbon sequestration. These expert opinions were collected over two years (November 2022 - December 2023 - February 2024) and in total 38 interviews were conducted.
What did we learn?
Land agents considered that the general approach to valuing land for agriculture and forestry remained consistent. Nevertheless, the price of land has changed dramatically over the last five years, reflecting changing investment demand and wider market conditions.
A key driver of change has been an increase in demand for land for tree planting, meaning that plantability has become a highly significant factor in determining land values, particularly for hill land. Land values have also been influenced by various external market factors notably interest rates, inflation, timber prices and carbon credits which have impacted investment demand and therefore the values of sales in the market.
The potential to monetise land through carbon credits has been another key strand within this picture, creating a new use case for valuation. While carbon was noted as a strong influence on the market, agents commonly took a cautious view on the reliability of carbon price forecasting. The influence of carbon is strongest for hill land and is particularly relevant to the valuation of Scottish Estates. Agents reported that the plantability and the extent of degraded peat have replaced sporting metrics when assessing the value of upland estates.
What do we recommend?
We will continue to monitor developments across the land market and report on changing dynamics. Subsequent briefings are scheduled in 2024.
Read the full report below.
